Q&A: Rajan Raju, CEO, DWS Investments (Asia)

'Scams may affect India's premium'

Rajan Raju, who joined as the chief executive officer of DWS Investments (Asia) in October, says India has started appearing on the radar of foreign retail investors. In an interview with Mehul Shah, he outlines Deutsche Asset Management’s plans for the Indian market. Edited excerpts:

What is the purpose of your visit to India?
India is a very important market for us. In India, mutual funds are still at an early stage of their life cycle. You will find that most people put their savings into deposits. In most other countries, as the economy develops and as industry develops, people start putting more money into mutual funds. In India, we have a huge opportunity to become a part of that journey, as customers move their money from deposits to mutual funds.

We are at the next step of journey in India –growing our footprint, being more relevant in the mutual fund space and being able to put some of our international products, which are extremely successful, for consideration of Indian investors.

What is the level of interest among foreign retail investors for Indian stocks?
It has started to grow. China has occupied the interest of international (retail) investors for a long time. But, India has started appearing on their radar screen. Foreign institutional investors (FIIs) have been in India for a long story. Retail investors are increasingly starting to know about India. I will say it is still at the interest level right now. To convert that into a purchasing opportunity will take a bit more time.

How are FIIs viewing the series of scams that have surfaced in the recent past?
A lot of institutional investors have got large offices in India.

For them, India is not a new place. They have people on the ground. They understand how India works because they have been here for a few years. Depending on what the negative news is, they will form a judgment just as anybody else who understands India well. If there are more frequent occurrences, obviously that will start getting factored in.

Will these scams affect the premium India enjoys over its emerging markets peers?
To be fair, the premium is likely to get affected, depending on how bad the news information is. This is, again, nothing new to India. One has seen this in other countries also that are popular among investors. Whenever there has been a political, economic or governance issue, the premium has obviously dropped.

Will there be any impact on foreign flows into Indian stock market because of the scams?
It is too early to say. There is nothing that has come out of the whole thing. It is still at an investigation stage. Right now, there are issues that have emerged, which will put a flag of caution on investor sentiment. Once the investigation is complete, people will understand what exactly happened. Then only a concrete decision will be made.

What is your view on the risk of defaults in some European countries?
There are some risks there (in Europe). You will find lot of those risks emerge from some of the stuff we are currently seeing as a result of the global financial crisis. The governments have got a lot more resolve in addressing these issues. One can seen what happened to Ireland. These kind of measures can be taken for some other countries also, if required.