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Kotak Mahindra AMC says FIIs worried about IL&FS crisis

Updated : October 29, 2018 06:19 AM IST

Kotak Mahindra Asset Management Company on Friday said foreign investors are more worried about the Infrastructure Leasing & Financial Services (IL&FS) default crisis.

In an interview to CNBC-TV18, Nilesh Shah, managing director, said he explained to foreign investors that IL&FS was a liquidity issue and not a solvency issue and the government has taken steps to resolve the issue.

However, so far this feedback has not percolated to end investors and they are still worried about IL&FS being a Lehman crisis in India, Shah said.

He said second worry is about higher China weightage in MSCI Indices and correspondingly India weightage coming down, adding that majority of people were overweight on India and underweight on China as for the the last three years, India has massively outperformed China.

Shah further said investors are worried about shifting portfolio allocation towards China shares and consequently to sell Indian shares, "So they are worried about our response to MSCI."

Third worry is about fixed income space as foreign institutional investors (FII) have put $65 billion in fixed income in India and country is not part of any index, while China is laying a roadmap of getting into debt market index, Shah added, "So, they are worried about India remaining a non-index bet."

While, foreign investors are also worried about ease of doing investments in India, Shah said.

Talking about domestic inflows in the mutual funds, he said most of the investors are new and they have to be convinced about the long-term benefits of investing through SIP, he said.

On the liquidity issue related to NBFCs, Shah said the regulators need to work closely with market to build confidence and efforts are being taken in that direction.
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