Mr. Nilesh Shah, Deputy Managing Director, ICICI Prudential AMC

1. Now that the markets are off their high, do you think it is a good opportunity to invest with a long-term perspective?

Post the correction; markets are trading at reasonable valuations of 13 to 14 times one-year earnings. With Indian growth expected at 7-8 % for FY09 despite the slight moderation this seems to be an ideal time to invest in Indian equities with a long-term perspective. However retail investors should refrain from timing the market and the prime emphasis should be on early participation in the process of investment. Retail investor do not have the time and are not well quipped with the resources required to monitor market triggers. Their focus should be on long-term systematic investment, asset allocation and timely asset rebalancing all of which will aid in wealth creation.

2. What is your view on the valuations of Indian Markets? How do they compare with other emerging markets?

Indian equity markets have narrowed their valuation gap vs. other peer groups in BRICS as well as emerging markets. Indian equity markets are now trading almost at par with comparable peer groups on PE growth basis.

3. Which sectors do you feel comfortable investing now? Also where do you maintain underweight positions?

We think Telecom, Capital Goods, and Technology - Large Cap, Infrastructure & Pharma looks comfortable from the investment and valuations point of view. Banking has some more bad news to price in. FMCG looks expensive from the valuations point of view.

4. Since the start of the year, we have seen exodus of money. How is the mood of the global investor towards India?

The primary reason for concerns amongst FII's is high oil prices, which has led to high levels of inflation thereby increasing the trade deficit. When the oil prices come down, global investor interest in India will also come back. Also Global investors, who are looking at Indiaover the longer term, continue to believe in the potential of India and the growth opportunities present in the country. It is short-term speculators and investors who have wound their positions in the Indian markets. With the Indian growth story being driven on the back of strong fundamentals, a consumption driven economy, infrastructure growth, and demographic advantages the long-term growth is intact. Long term Investors, global as well as domestic have continued to stay invested in the Indian equity market on the basis of the long-term positive indicators.

5. Inflation is higher and interest rates are getting higher from here; when do you expect to see a meaningful impact on growth?

Impact of any policy decisions specifically rate changes is not immediate. It takes time for the required results to be achieved. Inflation currently at around 11.5% is a serious cause of concern. The RBI has been trying to contain inflation through rate hikes and other monetary policies. The government has had to deal with the dual agenda of managing inflation while also ensuring that growth is not largely compromised which is a very difficult task to accomplish.  Also, inflation is driven by global factors as well like high oil prices.  It will take time for the results of monetary tightening measures to be seen. However, the commitment by the government to contain the situation combined with a reasonable GDP growth is expected to help balance the situation.

6. Talking about earnings for the coming quarter, do you think it is possible that the July number surprises on the way up?

There are concerns in the market on the growth momentum on account of slowdown in industrial production growth, interest rate hardening and high input cost reducing profit margins. Also inability to pass the price pressures on the customer who is already bogged down by pressures of record high inflation adds to the woes. On account of stated concerns, earning is expected at around 10-12 % YOY growth. Indian corporates also have the tendency to declare good results in good market and bad results in bad market.

7. Oil prices have moved up substantially in the last 1-year. How do foresee oil prices moving in the next 1 year?

We do expect oil prices to come down, however, it will be difficult to put a timeline on the same. High oil price is the main driver behind the record inflation numbers and high commodity prices. The impact is also being felt across most global economies including the oil producing nations.  Thus reduction in the oil prices globally and controlling inflation is in the interest of everybody and is going to gain priority across the globe. The steep oil price has been primarily on account of demand - supply mismatch combined with speculation. Going forward, high inflation concerns will lead to the oil-producing nation demanding control on speculation while the non-oil producing nations will demand easing of supply pressures. On the basis of this trade off, we could expect reduction in oil prices at some point of time in the future.