He added that, there has been no significant redemption from Indian hedge funds. Inflows have been marginal in the first three months. The emerging market hedge funds have attracted capital of more than USD 3 billion so far in the year.
"A number of high profile investors are quite bullish on gold and some are moving forward from gold to acquire hard assets. The view looks divided but many believe that gold will go up sooner or later," says Mumtaz to CNBC-TV18 in an interview.
Also read: See significant upside in mkt, largecaps to lead: Antique
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is your view on flows? In last couple of week we saw either no Foreign Institutional Investor (FII) flows into India or a minor amount of outflows. Has the tide changed only for India? What is your forecast of how this trend might evolve?
A: The emerging market flows specifically remain quite popular. We saw money flowing on the equity sides while the capital markets have raised and attracted record flows in the first quarter.
Figures by Sebi indicate that the Indian market has attracted substantial capital over the last year and almost 40 percent of that flew to the Indian markets in the first quarter. The foreign inflows have trailed down in March, but investor appetite remains high and we should expect the tide to go back into inflows soon.
Q: So you have not seen any of the clients or investors reduce their exposure or cut down their percentage of India holdings?
A: In terms of hedge fund flows we have not seen any redemption from Indian hedge funds. Inflows have been marginal in the first three months. The emerging market hedge funds have attracted capital of more than USD 3 billion so far in the year. The Chinese hedge funds have attracted more than a billion dollar so far in the year.
Asia ex-Japan hedge funds have gained USD 3 billion which indicates that these funds also have exposure to India. The most popular countries for investment for Asia ex-Japan funds are China, Indonesia and India. Interest is still present. It is just a strategic or tactical measure to lower their exposure for the time being.
Q: The other big global event of the past two weeks has been a definite change in the way the Bank of Japan (BoJ) is approaching the economy and this announcement of 1.3-1.4 trillion yen that they plan to print. How would you tackle this news? What will it make you buyers of, maybe the Nikkei? What else will you buy? How does it change asset allocation?
A: The new Japanese government has followed what was the American trend over the last few years. They are printing money and this seems to be a temporary measure to bolster up the markets. In long-term we still need to see how it will affect the markets. It seems to have stabilized the European and the American markets and Japanese market has certainly seen a substantial amount of growth and Japanese hedge funds remain the strongest performers so far in the year.
A number of other investors have actually shown interest in investing in Japan, especially institutional investors. So for the time being at least for the next few months it indicates that the Japanese market will keep going up.
Q: Any signs of Exchange-Traded Fund (ETF) selling in India?
A: ETFs remain quite popular with investors and a substantial amount of the capital flowing into India is via ETFs. It seemed that investors are approaching the slight negative outflows or the marginal inflows as a short-term tactical measure, because overall the view remains positive.
Q: What about gold? The manner in which the Japanese Central Bank has announced and the fact that the US has not really cut back, it is only expected in 2014 to cut back its quantitative easing, gold appears to have hit a top very distinctly. What would you do with gold?
A: Every hedge fund has the different view on how they approach different asset classes. A number of high profile investors are quite bullish on gold and some are moving forward from gold to acquire hard assets. The view looks divided but many believe that gold will go up sooner or later.
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