Page 75 - IACC Newsletter August-September 2013 Issue 13

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Moving on to markets, the Fed tapering is an important issue across the world, especially for the emerging markets.
When do you expect Fed tapering to start and how much to begin with?
In the last Fed meeting, most of the market participants got it wrong or were surprised since they expected the decision
on tapering to take place, but it didn't happen. Our expectation as a firm is that it is delayed and will possibly start in the
first quarter of 2014, between January and March. But, everything depends on the new Fed chairperson's decision.
The latest US housing data numbers aren't encouraging. How do you see the entire macro-economic situation?
That's why Fed chairman Ben Bernanke said that he would wait and ascertain the situation before taking a call on
tapering. The economic situation in the US has been improving, showing some signs of life with parts of the economy
growing faster than others, but not at full tilt yet, whether it's job creation or housing or anything else. Housing is one of
the important factors which had come back, but I don't think it will reach a level it was before the bubble.
Volatility has increased tremendously since the beginning of tapering talks in the past four to five months. Do you think
it will continue for a few more years?
The interesting fact about the financial situation in the emerging countries is that their financial conditions are much
better than 10 years back when we saw immense volatility. I would say that once the headlines in the news get past us,
markets will let fundamentals take over again. I don't expect the volatility to remain as strong after the initial tapering
moves.
What's your take on India?
India could be very good destination to invest in once the government makes some structural changes. The new RBI
governor has taken some positive steps, and the Indian currency has improved because of that. There's no major concern
other than the macro environment.
IMF has downgraded India's GDP to 3.8% -- what's your view?
JP Morgan estimates FY14 estimate GDP growth at 4.1%. We see a measured uptick in growth into the second half.
Exports should benefit from improved global growth. Domestic consumption should be aided by a strong showing from
the agriculture segment and pre-election spending.
Since the beginning of the year, foreign institutional investors have invested over $11 billion. But the money has gone
into selective stocks: what's the reason? Any Indian sector you are bullish on?
Foreign fund managers invested in select stocks with global sales, which are in high demand, or if they have a high degree
of comfort with the company's management team. It has been IT services, healthcare and consumer stocks for the last
couple of quarters, and I think going forward, IT services and healthcare sector stocks should do well.
In terms of ranking, where do you place India among emerging countries?
For us, India right now is neutral. We are now more constructive than a month ago but not convinced to re-rate to
overweight or to recommend aggressive accumulation just yet.
Bond yields have gone up for the last few months: do you think this will impact the money flow into equities?
I think the equity asset class has underperformed for a long time and valuations are fairly attractive at this point of time.
The dynamics of the US corporations are fairly positive and there's still room for the US markets to move upwards.