'Valuations are no major concern'

Q&A: Andrew Holland

Andrew Holland, the managing director of DSP-Merrill Lynch's Strategic Investment Group, has been in the country for around eight years after stints in Korea, Japan, Thailand and Malaysia. The 47-year-old Holland spoke to Palak Shah on the impact of the much talked-about slowdown in US and Europe on the emerging markets.

Where do you see the Indian markets heading?

If the Federal Reserve had cut its key interest rate by 50 basis points, the Indian benchmark index would have touched the 21,000-mark in a short span of time. However, markets are set to scale new highs.

Are the US and European markets going to witness a significant slowdown?

All the indicators in the US are pointing towards a slowdown, with new home sales inventory now standing at nearly their 11-month low.

The problems of sub-prime loans are likely to play out over 2008 and, therefore, they are not just a one-off event. In Europe, the first indications of a housing slowdown are emerging and the result of all this will be a slowdown in consumer spending and thus lower GDP growth.

What could be the impact on the Indian markets?

I see 2008 as a difficult year for global markets with increased volatility. This may negatively impact Indian markets too, as investors take risk off the table. However, I do expect the Sensex to move higher in 2008, even though the returns may be lower.

Is the valuation of Indian stocks a concern?

Considering the fact that the Indian economy is likely to grow at 10 per cent for the next five years, valuations would not be a major concern. With nearly $600 billion to be invested in the county's infrastructure development projects in the coming years, India will increasingly become an attractive destination for investment. The Indian growth story has just begun.

Will the turnover in the derivatives segment fall after the Sebi's move to curb participatory notes?

The turnover could fall going ahead, but only for a short span of time. More FIIs are likely to register in the coming months.

How do you view the Sebi's move?

It will provide for greater transparency going forward...which is a good thing.

Isn't it true that a few top FIIs can influence the stock markets heavily?

With the market capitalisation at over a trillion dollar, it is highly unlikely.