 "Vaibhav Sanghavi")
October would be eventful for the markets, considering the Reserve Bank of India (RBI)’s review of the monetary policy.
At the global level, uncertainty surrounding the US government shutdown and the US Federal Reserve meeting would also keep the sentiment in check.
Vaibhav R Sanghavi, director (equities), Ambit Investment Advisors, in an interview with Aastha Agnihotri, talks about the impact of the current environment on the markets. Edited excerpts:
Indian markets have shown resilience, despite the negative news flow globally. Where do you see the markets by the end of the year?
In the recent past, we have seen more positive news than negative. Yes, very recently, the shutdown did create some uncertainty. However, there has been a lot of positive news from the global economy. These include the postponement of tapering and dovish commentary from the US Federal Reserve; the peaceful resolution of the Syrian crisis, leading to lower oil prices; stability in Europe, etc.
These have resulted in better liquidity flow in emerging markets, positively impacting India. I believe towards the year-end, global markets would continue to see higher liquidity, which would continue to favour emerging markets, including India. Thus, in spite of domestic problems, we may see markets remain buoyant, albeit amid high volatility.
Do you think the postponement of the stimulus tapering by the US Fed could have a disastrous impact on our markets later?
The postponement of tapering has given a good warning to all emerging markets to look at their problems seriously and ready solutions to those. The good part is they have got time for that. The big movements in currencies and indices in August have given an advance warning to policymakers to find a concrete solution.
Positively, the government, along with RBI under the new governor, has taken good concrete policy measures which would be very helpful to abate a lot of turbulence, whenever the tapering begins. Yes, we, along with emerging markets and other economies that have higher CAD (current account deficit) would be affected. But I believe it would be lot less than expected.
How are you positioned ahead of the key events in October, including the Federal Open Market Committee (FOMC) meeting and the RBI policy review?
The policy events of FOMC and RBI in October are a lot more predictable than in September. Now, we are more aware of the path both FOMC and RBI are going to take, though there is always a possibility of a surprise.
But relatively, it’s far better. I think it is going to be more of a non-event and we would be aligning our portfolios after clarity on the debt ceiling in the US, with a view of the likely quarterly earnings.
So far, Indian markets have been very bipolar. Do you expect this to accentuate?
I believe markets are seeing consensus in a very short span of time. And, the natural effect of this is higher skew and volatility. This would continue till we start seeing a broader recovery in the economy and the markets.
The rupee has recovered drastically from its lows. What is your near-term outlook for the currency?
The rupee is now starting to be stable. This is partly due to the weakness in the dollar globally and the measures taken by RBI to accentuate flows. However, it is important to note there would be sizeable demand for the dollar in November and once the debt ceiling problem is over, we might see the dollar starting to appreciate again.
It is difficult to predict these movements precisely. However, the longer-term trend would be a stronger dollar, as the US economy recovers. In the near term, the rupee may not go below 60.
Do you expect second-quarter earnings to be lacklustre due to high interest rates and the demand slowdown?
We expect the quarterly numbers to be weak rather than lacklustre due to higher interest rates and, more importantly, because of the forex hits they might have incurred during the quarter. However, it is very important to not throw in the towel, looking at the quarterly numbers.
Which sectors are you bullish/bearish on and why?
We continue to like the longer-term theme of a stronger dollar and a better global economy. Therefore, we would continue to like information technology, oil exploration and exporters. Also, from a longer-term perspective, we are positively inclined towards industrials. The sectors we are bearish on are consumers, due to weak urban spending and companies with stressed balance sheets.
At the global level, uncertainty surrounding the US government shutdown and the US Federal Reserve meeting would also keep the sentiment in check.
Vaibhav R Sanghavi, director (equities), Ambit Investment Advisors, in an interview with Aastha Agnihotri, talks about the impact of the current environment on the markets. Edited excerpts:
Indian markets have shown resilience, despite the negative news flow globally. Where do you see the markets by the end of the year?
In the recent past, we have seen more positive news than negative. Yes, very recently, the shutdown did create some uncertainty. However, there has been a lot of positive news from the global economy. These include the postponement of tapering and dovish commentary from the US Federal Reserve; the peaceful resolution of the Syrian crisis, leading to lower oil prices; stability in Europe, etc.
These have resulted in better liquidity flow in emerging markets, positively impacting India. I believe towards the year-end, global markets would continue to see higher liquidity, which would continue to favour emerging markets, including India. Thus, in spite of domestic problems, we may see markets remain buoyant, albeit amid high volatility.
Do you think the postponement of the stimulus tapering by the US Fed could have a disastrous impact on our markets later?
The postponement of tapering has given a good warning to all emerging markets to look at their problems seriously and ready solutions to those. The good part is they have got time for that. The big movements in currencies and indices in August have given an advance warning to policymakers to find a concrete solution.
Positively, the government, along with RBI under the new governor, has taken good concrete policy measures which would be very helpful to abate a lot of turbulence, whenever the tapering begins. Yes, we, along with emerging markets and other economies that have higher CAD (current account deficit) would be affected. But I believe it would be lot less than expected.
How are you positioned ahead of the key events in October, including the Federal Open Market Committee (FOMC) meeting and the RBI policy review?
The policy events of FOMC and RBI in October are a lot more predictable than in September. Now, we are more aware of the path both FOMC and RBI are going to take, though there is always a possibility of a surprise.
But relatively, it’s far better. I think it is going to be more of a non-event and we would be aligning our portfolios after clarity on the debt ceiling in the US, with a view of the likely quarterly earnings.
So far, Indian markets have been very bipolar. Do you expect this to accentuate?
I believe markets are seeing consensus in a very short span of time. And, the natural effect of this is higher skew and volatility. This would continue till we start seeing a broader recovery in the economy and the markets.
The rupee has recovered drastically from its lows. What is your near-term outlook for the currency?
The rupee is now starting to be stable. This is partly due to the weakness in the dollar globally and the measures taken by RBI to accentuate flows. However, it is important to note there would be sizeable demand for the dollar in November and once the debt ceiling problem is over, we might see the dollar starting to appreciate again.
It is difficult to predict these movements precisely. However, the longer-term trend would be a stronger dollar, as the US economy recovers. In the near term, the rupee may not go below 60.
Do you expect second-quarter earnings to be lacklustre due to high interest rates and the demand slowdown?
We expect the quarterly numbers to be weak rather than lacklustre due to higher interest rates and, more importantly, because of the forex hits they might have incurred during the quarter. However, it is very important to not throw in the towel, looking at the quarterly numbers.
Which sectors are you bullish/bearish on and why?
We continue to like the longer-term theme of a stronger dollar and a better global economy. Therefore, we would continue to like information technology, oil exploration and exporters. Also, from a longer-term perspective, we are positively inclined towards industrials. The sectors we are bearish on are consumers, due to weak urban spending and companies with stressed balance sheets.
