At a time of turbulence abroad, with India feeling the heat, too, Craig Lazzara, a senior director with S&P Indices, advises Indian investors to be bullish when the markets are down. He also talks to Shine Jacob on the S&P 500, which got listed on the National Stock Exchange recently. Edited excerpts:
Are you pleased with the responses to the S&P 500 from the Indian market and investors here?
Yes, we and the NSE are really pleased. Anytime you launch a new product, you don’t have good expectations. It takes time for these models to develop. The good thing is that half of all NSE members have traded in these contracts. In that sense, the mood is clearly receptive.
This is the first time the S&P 500 has traded in any country other than the United States and in a currency other than US dollars. The NSE was really instrumental in helping us to figure out what the product should be. For investors with some past exposure in the US, these contracts will help to hedge exposure. It also helps domestic investors to make an entry into the US market. It gives you a lot of flexibility.
Why did you choose India and the NSE to introduce this product? What are your plans regarding India?
We have had a strong relationship with NSE from 1998. Coming from the US, we needed a strong local partner to deal with. NSE has worked with the Chicago Mercantile Exchange to develop this model. Further down the road, if somebody asks what would be your next contract with NSE, I would say if the members of NSE come back after a year and say our experience with S&P 500 was good and we really like to access smaller capitalisation stocks in the US, then we may see an S&P 400. However, we don’t have any specific targets regarding India now.
After S&P’s downgrading of the US and the market situation there, do you think another recession is waiting? How do you see the situation from an investment point of view?
All these things are true — that unemployment is on a high, the economy is not growing and there is clearly a debt problem. From an investor’s point of view, you can judge it in two ways. One way, things are bleak and it is not a good time to invest in the US. But if you look back, people who invested in new concepts at a time when everybody talks good and enthusiastically may regret it. When you feel it is the worst, it might be the best time to take action in positive way. Those who invested in early 2009 did the same thing.
From the trading point of view, it almost doesn’t matter. For traders, the increased volatility in the US market is an advantage. If the swings are bigger, the profits are bigger. For a trader, wider swings in markets are better than narrow ones. For them, it is a potential opportunity. If you survive, you must reap.
Will the euro zone crisis affect the Indian markets?
It is clearly a difficult time for banks in the euro zone. I have no forecast about how it will evolve or how it is going to last. The Indian economy is rather export-oriented. If European economies slow down, it will have an impact on Indian exporters, too. It will be a challenge to see how it evolves. For investors, we say get in when the markets are lower.
It is widely believed that during a time of crisis abroad, foreign institutional investors show keenness in India and once it is over, they lose interest. Is it true?
I never got such an impression from anyone I talked to, that their potential interest in emerging markets, specifically India, is temporary. Companies and investors are looking more on markets like India. I think the notion of India as a permanent investment destination is true.
After India, which is your next destination?
We already have some relationship with China. So, China is clearly a possible destination, for the same reasons as India. We have our products in other markets like Chile, Peru, Ecuador and Brazil. All emerging economies interest us.
