Country Manager-India of Shinsei Bank, Sanjay Sachdev believes that the long term environment is still stable in India. He expects seeing short-term volatility in the markets. He adds that Japanese investors are positive about India on a long term perspective.
Managing Director of Prudential Corporation Asia, Ajay Srinivasan informs that year-to-date flows from Japan to India stand at $230 million. He also adds that India-dedicated Japan funds have a total corpus of $8 billion. He sees a shift in Japan towards riskier assets due to which India would benefit.
Excerpts from CNBC - TV18's exclusive interview with Sanjay Sachdev and Ajay Srinivasan:
What is the buzz from Japan? Are people getting a bit skittish or are they keeping the faith?
Sachdev: Not really, any goldilocks scenario as this country of ours has been experiencing over the last couple of years; we are going to see some lollipop sort of environment. That is really what has been happening over the last 2-3 months. But the long term clearly remains to be a very stable environment, in our opinion. There will be short-term volatility just like any emerging market experiences but from a Japanese perspective we are very positive about India from a long-term perspective.
What has been your experience - since you run a very fairly significant pool of money from Japan - has there been any kind of redemption or any kind of edginess there?
Srinivasan: Sanjay has given you a good sense of the sentiment; let me give you some data. If you look at just flows of 2006 the total flows from Japan into India was about $2.8 billion. If you take year to date '07 that is probably end of February. these are Bank of Japan numbers the flows are around $230 million so slightly slower than 2006 but you would expect that given the volatility in the market that we have seen so far.
The total fund now for India dedicated funds out of Japan is about $8 billion and you must understand this is from zero in 2003 so it is really built up quite strongly in the last few years. I just point to a broader trend that is taking place in Japan and I think India has been one of the beneficiaries of that and has been over the last few years and everybody knows the quantum of personal financial asset is huge.
A large amount of that stays in pretty low-yielding deposits and domestic assets. Over the last three years you can see a marked shift
For many of these funds though, have you begun to see any initial redemption pressures yet and are any of them raising or looking to raise fresh money in the next few months?
Srinivasan: At the end of last year we raised an India infrastructure fund and that fund has continued to raise money. We haven't seen any specific redemption pressures; partly because when we sold the India story and sold our funds it was on the basis of the long-term potential of India. We never said come in and make 40% return in a year, it was really on the long term potential for India and people have faith in that and therefore will stay on.
What would you focus on and are you beginning to hear of any redemption pressures or concern from investors, because many of them happen to be on the retail side?
Sachdev: I agree with Ajay, because we also launched our fund at the end of December and we now have over $300 million in the last 2.5-3 months so we have actually seen net inflows on overall basis.
Investors in Japan look at India from a long-term perspective and they are much more comfortable with India compared to a China play, traditionally for number of different reasons but mainly the market and growth rates and much more stability from a long-term perspective and I think we will continue to see that. As Ajay pointed out, $8 billion is the number and we expect that number to go up to $18 billion over the next 12-18 months.
Are you saying that the amount of Japanese money alone into India over the 12-18 months could be to the tune of $10 billion dollars?
Sachdev: I think that is a very conservative estimate.
That is more than the entire pool of FII money, which came in last year into this country?
Sachdev: Yes, I am talking about the next 18 months because Japanese money has been more traditionally more long-term in orientation as far as India is concerned; it has been slow to pick up in terms of their familiarity with India but today in Japan if you go to customers, there is a lot more focus on taking a little bit more risk because of the very low interest rate scenario. Secondly they have also seen our (India's) track record.
Would you like to come in on that?
Srinivasan: I have no view of the future, I think the general point is that people are reasonably bullish on India and they see many positives in longer-term but whether they would translate into numbers, I don't have a view.
