Demonetisation Is One Of The Boldest Moves Taken By Government

Sanjay Sachdev, Global Chairperson of FPSB and Chairman, Zyfin Funds speaks to BW Businessworld

Tell us a bit about ZyFin's business model. What are the company's expansion plans for the next five to ten years?
ZyFin is an unique asset management and advisory platform for global investors, focused on high growth segments of India and emerging markets. ZyFin brings both passive and intelligent investment products, including but not limited to ETFs, that provide global investors with cutting-edge emerging markets equity and debt investments solutions. In addition we make it easily accessible and cost-effective.

In November 2015, we listed the world's first Indian fixed income ETF - LAM Sun Global ZyFin India Sovereign Enterprise Bond UCITS ETF. As on 30th Nov, 2016 this fund has delivered a return of over 8 per cent in US terms to global investors. Our second launch was for the Turkish markets enabling global investor's to access Turkish capital markets. This was followed by the listing of the first Indian Sovereign Bond ETF in Mauritius Exchange.

Recently in September, we changed the entire ETF landscape of the European markets by launching the first physically backed, fully UCITS compliant Indian equity ETF based on the MSCI 10/40 India Index. Our vision continues to differentiate the commoditised asset management space by bringing in differentiated investment strategies which can be easily accessed by global investors.

What is ZyFin's take on the recent demonetisation move? How do you see it impacting the markets and the broad economy over the medium to long term?
Demonetisation is one of the boldest moves taken by the Indian Government in decades with clear thee pronged objectives: (a) Bringing the parallel economy within the ambit of formal economy (b) Increase the tax base of India and (c) Clamping down of counterfeit currency. Evaluation of such a strong measure has to be done objectively with quantifiable measures on the impact on the above core objectives. Our expectations are that this will have a structural impact on the Indian economy on each of the three objectives and will not only have result in significant long term benefits but even in the short term the economy will expand due to diminishing parallel economy. There will also be secondary benefits to the economy with the consequent increased digitalization and financial inclusion which will lead to strengthening of the fundamental macros of India.

Do you feel the debt markets in India are getting overheated? Do you see a potential asset bubble forming there and what would your advice to bond investors be right now?
Indian bond markets have undergone a significant transformation in the last five years with the depth, liquidity and participants increasing in a gradual and measured manner. In addition, RBI (Reserve Bank of India) has played an important role in ensuring that the growth of bond markets has been well structured with a constant focus on ensuring inflation being under control. This has led to a situation that as the global developed markets, which were flush with liquidity, are now moving into a zone of increasing interest rates. India bond markets remain relatively sanguine on its committed path of inflation targeting and consequential downward interest rate cycle. On any parameter, Indian bond markets offer global investors with risk adjusted returns which are superior to other emerging and developed markets in the current scenario and remain an attractive investment destination.

How should HNI's approach the markets right now? We're not exactly undervalued at the moment… what does your target asset allocation look like right now for a moderate risk investor?
From an equity market perspective the valuations of the Indian markets captured in the traditional benchmarks of price to earnings (P/E) or price to book (P/B) and comparing them to historical averages, do seem to indicate that the markets are trading at higher than fair valuations. However, if one were to super impose the valuation range and the premium that it trades as a comparison to the emerging markets and the developed markets, one can see that the overvaluation hypothesis may not be validated. It is imperative to take into consideration that historic averages are a relevant guide but one cannot use them on a standalone basis. Given that the underlying macro factors of India are strong, I would tend to believe that India offers an attractive, if not the best, investment opportunity at this point of time to not only fundamentally growth but also value investors.

Do you foresee global risks leading to a sizeable correction sometime soon? HSBC did raise an alert in October, albeit on technical... Experts are questioning China's burgeoning debt burden as well…
The global risks remain evenly poised at this point of time and the co-relation of global market markets in case of an unexpected new development remains. However, over the last 3-5 years more unknowns have moved to the known zone and has given global investor's significant time to develop strategies in case of such event's occurring. Thus in short we believe that the global markets at this point of time have moved from relatively high un-certainity to a zone of relatively low un-certainity, which is good for the market participants. Having said this, it is imperative to note that as the Chinese saying goes "we do live in interesting times" and we need to be adequately hedged in our investment strategies.

As the Chairperson of FPSB, what's your take on how the Financial Planning profession is set to evolve in India? Do you think India Inc is ready to pay for quality financial advice? Having said that, are you in agreement with the recently proposed amendments to the SEBI RIA regulations?
FPSB (Financial Planning Standard Board) is committed to increasing professionalism and helping regulators and market participants implement global standards in financial planning and advisory. The core belief of FPSB is that increasing the trust in the financial planning profession can be achieved by defining and maintaining the standards through common certification standards such as the CFP among other steps. We believe that is the way forward for the financial planning profession to grow in India and to take this path of putting guidelines and standards in place on what constitutes financial advice and the process that should be followed to deliver this advice. The mechanism of charging fees cannot be the fulcrum of such differentiation and the process of financial advice delivery needs to be strengthened. SEBI has charted a roadmap of financial advisory but is seeing market resistance as there seems to be a trust-deficit and the objectives and methods need to be more intensely debated. All the participants like AMFI, distributors and even some investors have given their feedback and suggestions to SEBI for consideration and a further discussion will need to be initiated for a smooth transition.