FIIs getting more comfortable with the political risk in India, says Arvind Sanger of Geosphere Capital

Arvind Sanger, the managing partner of Geosphere Capital Management, shared his views and outlook on global markets and liquidity.

“I think some of the political fears that people had of the probability of a weak coalition outcomes and maybe even some combinations of opposition parties coming to power, that fear seems to have receded somewhat and obviously that is a result of the events of the last few days and weeks and at the same time, I think risks of any unstable war like situation breaking out between India and Pakistan has receded into the background. So I think you have got a little bit of a correction from clearly an oversold situation the Indian market was missing out on global market recovery. So I think India is playing a little bit of catch up and clearly, the midcaps and small-caps leading the way suggest that there is also a risk appetite a little bit coming back in the market. So I think it is a combination of factors but it is mostly being driven which is very interesting point by foreign institutional investors (FII) flows which suggests that FIIs are growing a little more comfortable about the political risk in India,” Sanger told CNBC-TV8 on Tuesday.

Talking about the global liquidity and central banks, Sanger said, “The problem with global liquidity is if anything changes on a global risk basis, obviously it can reverse but right now, obviously it looks like the US-China trade tensions seem to be receding. Clearly, central banks are on hold, ECBs on hold for a lot longer it looks like and the Fed has also signalled that it is on hold for a while. So that fear has gone away. The economic slowdown numbers that we have seen are - the US, Europe and China - more of a slowdown than an ending of this cycle and I think it has given central bankers an excuse to soften their tone and to loosen a little bit in places like China and certainly in India where the Reserve Bank of India (RBI) is on a loosening cycle. So I think the backdrop is more benign and that is helping from a liquidity standpoint on a global basis."

In terms of the Indian market, Sanger said, “We have been looking at some of the oversold high-quality names because there were some large-cap names that never sold as much which is where investors were hiding but some of the other names that sold off is where some of the opportunities lie and there are some high-quality midcaps you were talking about names like Ashok Leyland, Motherson Sumi, there are others of that category or of that calibre that we think there are opportunities in.”