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00:00 We have with us Cameron Rand, Director of Research of EPFR joining in.
00:04 Cameron, good morning and good evening rather.
00:06 You've tracked this data for decades together. You've been through multiple elections set ups
00:12 in India. You know what this data looks like at the back of your hand. And hence, we want to
00:17 understand from you over the last couple of weeks, or maybe after seeing a phenomenal six to eight
00:23 months in terms of flows for India, do you now feel like flows that are coming into India dedicated
00:29 funds are slowing down or have slowed down? The short answer is no. I have been expecting
00:38 them to get a bit slower and there was definitely a dip in the February, March time period,
00:45 but they've picked right back up again. I think we're looking at over 600 million
00:50 into dedicated India funds this week, which is certainly well above the historic average
00:58 and more in keeping with what we were seeing coming into this year.
01:01 So it's a fair assumption for me to make that the last two weeks have been phenomenal in terms
01:07 of inflows into India? Certainly, what I'm talking about is flows into dedicated India
01:16 funds, which is sort of blunt proxy for investor sentiment towards India. It's certainly been
01:23 running at stronger levels than I saw in the 2019 and 2014 elections. But in both of those cases,
01:34 it was generally positive, just not to the degree I've been seeing over the past,
01:39 actually, over the past year. Cameron, and this is ETFs or non-ETFs,
01:47 because I do know outside India, it is the active fund managers that draw some more attention than
01:53 passive funds. Where is the trend right now? Is it ETF, non-ETF, because those are also a lot more
01:59 expensive? Yeah, it's a mixture of both. ETFs are certainly expanding their footprint in terms of
02:12 India flow as much as they're doing in nearly every asset class. And we're seeing active
02:20 managers, certainly the diversified funds, being a bit more cautious towards India than the
02:27 allocations that the passive funds are buying to. But it's a hot market on both sides of the active
02:41 passive divide at the moment. The one headwind from a fund perspective is that diversified global
02:53 emerging markets and the Asia regional funds have seen pretty relentless outflows. And every time
03:00 that happens, they have to sell whatever weight they have towards India, which has been rising
03:06 to meet those redemptions. Okay. Cameron, hi, Tamanna here. So, just to put into perspective,
03:14 because we're sitting here wondering why we're seeing these kind of FII outflows. And one of
03:20 the theories is perhaps global investors are waiting for the election results, which will
03:27 come in on June 4th in India to revisit their India allocations. From what you're saying,
03:34 it seems as if the outflows from India are incidental to other global allocations and
03:40 not necessarily an India story. Is that the right way to look at it?
03:43 It is. When investors look purely at the India story, sentiment is still very strong.
03:51 But a lot of the flows, certainly from a fund perspective, are tied to sort of relative
03:58 allocations of diversified funds. And those are both choppier in terms of the flows and
04:08 sentiment towards India on the part of the managers isn't as bullish
04:11 as we're seeing with individual investors.
04:16 Is this also in some part, you know, how would you relate this to China now improving the latest
04:26 Chinese data, Chinese trade data points, one more indicator to a resurgent China?
04:31 Do you see that impacting India flows in the medium to long term?
04:36 Certainly not right now. The narrative for China having been relentlessly positive for so long
04:49 has flipped. And by that, I mean that investors are now treating good news out of China with a
04:57 great deal of skepticism. So we've actually seen pretty heavy outflows from dedicated China funds
05:04 this week. I think there's quite a bit of pent up demand to sell. So when there's an improvement
05:12 in China, we've tended to see people cashing out. I think in the long run, obviously,
05:20 the India China comparison is important, but I think in some ways, India is going to get a pass
05:31 for the remainder of the year, because the focus here is going to be very much on the presidential
05:35 election and how whoever wins it in November approaches the US Chinese relationship.
05:43 Come on, let's talk about the debt markets, because while equity markets,
05:49 like you indicated, have been very hot for FIs, India's inclusion in the JPM
05:55 index has drawn considerable amount of funds in the last few months into Indian paper.
06:02 Indian debt versus Indian equity, where do you see the momentum continuing over the next couple
06:07 of months? I think it will be more evident on the equity side, and that's largely just because
06:17 there's a longer track record. People are more used to buying into Indian equity markets,
06:26 know where to find the information that is useful to making those decisions. So I think
06:32 there'll be something of a learning curve for Indian fixed income markets and the funds that
06:42 provide access to those. So I'm not expecting a real takeoff and certainly haven't seen it in a
06:49 fund flow perspective, but I do think that India's story is long term enough that we'll start to see
07:01 a steady increase in both flows to dedicated funds and allocations in the diversified funds.
07:09 Cameron, we'll leave it at that. Thank you so much for taking the time out and being with us
07:16 and giving us your thoughts. Really appreciate your time this morning.