What's the reason for the market slump?
The recent sharp correction is a combination of global volatility and local factors. Most global markets started correcting from November 2007 onwards. However, Indian markets outperformed global markets significantly in November and December, holding on and even forming new highs, due to very positive retail investor sentiment. This coincided with a large increase in derivatives positions. The conclusion one can draw is that the markets were being supported by significant speculative interest.

Futures positions peaked at over Rs 1 lakh crore and the sentiment was also held up by the positive response to company IPOs etc. However, FII flows had slowed down sharply. In fact, FIIs were significant sellers in the derivatives segment since December 2007. Hence the market was clearly in a euphoric zone and overbought, especially considering the degree to which global markets had already corrected. The resultant correction of course was much sharper than anyone's expectations.

Has the India story weakened?
The overall investment theme for India is still intact, especially given that India is one of the few emerging markets with strong local consumption as a driver of growth. There is no reason to write off the overall story based on a market correction. While valuations were stretched in certain pockets, even those were because of over-optimism on growth. The correction has brought down valuations to lower levels and most of the froth may have already been removed. Hence we are back on a fresh wicket and markets should track earnings growth now.

Having said that there are concerns, some of which have been there for a while: The widening trade deficit, dependence on foreign flows to fund the deficit, a populist budget and ever-increasing subsidies.

How have you responded to the turmoil?
We have not reacted to the market correction. Over the past few months, we have been reducing our exposure to infrastructure and increasing it to FMCG, automobiles, energy and metals.