FII mood towards India & other EMs is downbeat: Ayon Mukhopadhyay

How are things on COVID-19 front looking?
The issue is getting quite diabolical in London. The cases are increasing every day. The city is in a complete lockdown right now and everyone is working from home. The police are patrolling the street. You obviously heard the news that both the Prime Minister and the crown prince are affected by the disease; so the mood is pretty sombre here right now.

But coming to your point, the investing mood is equally downbeat towards the emerging markets and towards India. Yes, you are right in saying that the FII selling has been pretty strong and there is no real short answer to this. I expect the FII selling to continue till we have more clarity on exactly where we are heading with this COVID issue.

How are your conversations going with some of the funds based in your region who look at emerging markets or have exposure? The kind of selling which we are seeing in emerging markets is not something we have seen in a long long time. What is the panic like there?
You are right. You have not seen something like this in the last 15 years because in the last 50 years or so, we have not really seen a crisis of this kind. This is not a banking crisis, this is not a crisis which has happened because of mispricing of assets or loose central banking policies. What we are facing right now is a humanitarian crisis across the globe. When we face the humanitarian crisis, our primal instinct takes over; so the first instinct is the protection of life and that is a humanitarian aspect.

So we do not know what will be the response of the government. Most governments have taken a cautious path having learnt from the catastrophic experiences in some European countries. But the question here is, how much lockdown can go on and what would be the effect of it. Are we talking about a recession that would last a couple of quarters or could it be a complete global shutdown, which would splurge us into a depression that would take years and years to come out of. So till the strategy for that emerges, the panic selling that we are seeing right now will continue and there will be extreme volatility that we are seeing in markets. We have a week where the index has fallen 20%, the next week the indices recover 15%.

But the general view is that the kind of fall that we have had, we might be nearing sort of a bottom formation. It is very dangerous to say that but there is no way that a bottom formation means that you would see a V-shaped recovery. The consensus is more changing now that it will be a U-shaped recovery and we do not know how long we would be at the bottom of the U.