"In the current scenario, we can never say that the worst is over in the equity markets, any negative news on the geopolitical level will take it down. I am not worried about the COVID-19 situation though."
edited excerpts:
A) There is limited room for fiscal stimulus from the government's side. I think lending by banks in the coming days should spur economic activity.
Banks were worried about moratorium-led NPAs. As the moratorium period is over, they will have a clear idea of what is going wrong in their books. Getting clarity on likely losses was the biggest worry for bankers.
A) In the current scenario, we can never say that the worst is over in the equity markets, any negative news on the geopolitical level will take it down. I am not worried about the COVID-19 situation though.
In a ruthless way, we can say that it is killing only 1.7 percent of the infected people so people will have to move on. Factories, construction etc. have already started but I am much more worried about the geopolitical situation.
Regarding geopolitics, as of now, it is the liquidity that is making all the moves in the market.A 5 percent dollar appreciation, which can happen because of geopolitics-led risk-off, can turn the tide away from the bulls. Thus we also need to consider developments on the LAC and south-China sea.
Q) The biggest driver of the equity rally is US markets. Some experts on D-Street feel that there could be some correction post US elections, and the same could flow down to emerging markets like India. What are your views?A) The US is the most capitalist society and that is its strength. The market may fluctuate but whether its Joe Biden or Donald Trump, basic policies will never change.
Q) FIIs seem to be going all-in for Indian markets which is a positive sign for now. Do you think it is the near-zero interest rates across the globe, or we are genuinely looking attractive?A) On the FII front, we have not even started yet. Wait for the dollar inflows in the Indian debt market and then we will see what bubble it creates.
We are attractive as we are offering amazingly attractive dollar yields in debt. It is the positive spiral for Indian debt now.
The money will come which will lead to an appreciation of INR which will further increase the attractiveness of yields. It works both ways. In 2013 we were on the negative side, however, as of now, we are on the positive side.
Q) There is a lot of chatter around the Dollar index which is likely to go down, how will that impact emerging markets like India? If Trump wins the election do you see a strong dollar and how that impacts equity markets?A) We give undue importance to elections. The dollar can strengthen only if there is a big risk-off in the world. That can only happen if there is a war in the South China Sea or a war between India and China.
The dollar will go down if pure economics determines it- be it Biden or Trump it won’t appreciate. Please remember between 2001-2008 DXY depreciated by 40 percent because the US which was in fiscal surplus came in a deep fiscal deficit. So, I am not saying the same will happen now as we are not going from surplus to deficit, however, there is a downside in DXY.
Q) What is your call on the pharma? Do you think that the rally has already played out – Nifty Pharma is up 40 percent in 2020? What are your top bets in the pharma space?A) Pharma is coming out of deep underperformance of 4-5 years. 40 percent run-up is nothing in that regard. We think it must go much higher. We like Sun pharma and Torrent.
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