 "Shriram Ramanathan")
Are you hopeful as RBI gets a new chief?
In terms of the current situation we are in, it's good to have somebody like him. As of now we know very little about how he deals with various things - be it economic situation, politics amid various other pushes and pulls.
But looking at the credentials and the way he is entering, it seems results should be positive. That also gives him a lot of weight to be able to stick to what he thinks is right for the economy. The question is with all these things would he be able to turn things around?
What are you expecting from FOMC meeting?
Little bit of news and data coming out of the US is an indication that gradually things got tapered down on the tapering side itself, in terms of the quantum and what it implies. And broadly, consensus is now at $ 10-15 billion against $ 20-25 billion expected earlier.
That means extent of withdrawal of liquidity will be less. So, may be things will be better than expectations. The negative impact on emerging markets might be less. A lot of fear is already priced in various markets since Bernanke spoke about it.
What about RBI's 20th September policy?
I think we just need to wait for the new governor to speak his mind up. Because the problem with our policy is there are so many different data points and the spectrum is from one end to the other.
So, it all depends on which data point one looks at. Inflation, for example; you have core WPI currently at 2.2% which is very low. And if you condition policy on it then one can come out with a particular set of measures. If one looks at headline WPI which is 6%, which is high, measures could be different.
In terms of liquidity tightening measures, the effectiveness of such steps is under question. Has it really prevented rupee depreciation? Nobody is sure whether it helped or not.
Will he roll back CRR? The answer would be probably not. But I think, he might give indications. If FOMC gives a positive indication, RBI might give an indication that it is looking to roll it back. May be not now but over the next 2-3 months. But at the same time he (RBI governor) would continue to stick to what he had said that these measures are temporary. That will be seen as a market positive.
On the fiscal situation and the inflation side I think he would sound a little bit hawkish. He already has referred to CPI a little bit more, and it looks like he does not believe in ignoring supply side inflation. May be, if that's a line he takes, market will take it as a positive.
In your view, what's the difference between 2008-09 and now ? Both are the crisis periods.
One of the differences between 08-09 and now is that overall globally it is not a panic situation. That time it was in unison and across markets. Problems now are lot more specific - a few countries. But a lot of it for countries like India is somewhat self created.
Getting out of this mess requires innovative solutions and a little bit of luck too in terms of how globally things are panning. We also need to tone down our own expectations of our country's growth and reconcile ourselves for a couple of years for slow growth and rectify a lot of excesses. It will be a slow painful recovery.
Based on these assumptions, how are you positioning yourself in your portfolios?
We need clarity, first of all. One thing that we do not want to do is without enough clarity jump in with a very strong view. That's what we have done over the last couple of months. We have been quite pro active in cutting off risks and see how things develop.
The key is not try to trade too much. We are neutral to moderately bullish on durations but very cautiously. As of now, it will be immature to say that we have enough clarity. Market liquidity is quite thin.
