Q&A: Alka Banerjee, S&P Indices

'S&P may bring Asian products to India'

The response to derivatives contracts on S&P 500 launched in India on the National Stock Exchange (NSE) has been satisfactory for now, says Alka Banerjee, vice-president, global equity & strategy indices, S&P Indices. As Indian investors become more globally integrated, she expects more action in these products. Excerpts from an interview with Mehul Shah:

The response to S&P 500 futures and options launched on the National Stock Exchange (NSE) has been slow so far. Are you happy with the response?
A new product always takes time to pick up. People have to become familiar with it. They have been trading the Nifty for a long time. Also, most of the trading activity has been limited to India. As Indian investors become more globally integrated, you will see more action. I think it’s just a matter a time.

We are quite satisfied, as of now. We did not expect these products to come and suddenly replace the local derivatives products.

The market making scheme has yet not shown that kind of impact in terms of boosting volumes in these contracts. Your comments?
Both the S&P 500 futures and market making scheme are new. All these takes time to stabilise. People are used to very high volatility in the Indian market. The US market is not so volatile. People have to get accustomed to that as well. They can’t expect extreme gains and losses.

Any other new products you are planning to bring to India?
The next in-line, that may happen but I think it’s still further away, is more of Asian products. Indian appetite is still not there for global products.

Indian markets have underperformed the US markets in this year so far. How long is this trend likely to continue?
The issues happen to exist in the US and Europe. One would ask, if the economies in the US and Europe are in trouble, then why do emerging markets (like India) feel the impact more? This is because the emerging markets are the high-growth economies. India may have 7.5 per cent growth and not nine per cent but that is still higher if compared to anything in the US and Europe.

However, a large amount of investments that come into emerging markets are global. Foreign institutions’ appetite for risk plummets sharply when markets at home are in trouble. There is uncertainty in Europe. There is weak economic growth in the US, although the last quarter was strong. But, the appetite of global investors is such that they want to be in a safe haven, which is the US market or large-cap European markets. Once you have a domestic investor base that supports the market, then obviously they will invest more in their own economy. Global financial institutions’ appetite for risk changes with any change in local conditions.

India also suffered a lot from the fact that the growth rate was very anaemic, as against the expected nine per cent.

Which are the emerging markets that look attractive to global investors?
Asian emerging markets are looking attractive. Some of the Latin American markets like Peru, Colombia and Chile have done extremely well. They are the smaller emerging markets which have done well because they are commodities-based or natural gas or energy. Frontier markets like some African markets, for example, are interesting.