Indian mkts to go lower going forward: Marc Faber

 Excerpts from CNBC-TV18’s exclusive interview with Marc Faber:

Q: Do you see more pain for global equity markets in 2008 even from here?

A: Over the last twelve months financial stocks are breaking down in the US. But the rest of the market has held up very well. Material, energy and some capital good stocks went up. So gradually the market place is beginning to realize that the financial crisis is not going to resolve in ten minutes and it will take a lot of time. Many more banks will go bankrupt and it will spill over into what I call the real economy. The world will slowdown very because of the inflationary pressures. The consumer has two major categories of expenditure, the non-discretionary like food, energy, healthcare etc and the discretionary, which are typical consumer goods, appliances, cars, motorcycles, television sets and so forth. When the price of necessities go up substantially, as is the case for energy and foods now, we have less money to spend on discretionary items that  then will have a spillover effect on the economy.

Q: What about something like an India? We have been one of the worst performing equity markets. Do you see more pain for the Indian stock markets even from these levels?

A. When the market had hit 21,000, I had expected it to drop to12,000. On March 18, it dropped to 14,800 and then we had a typical bear market rally. That’s when all the Indian investors turned bullish again and the Sensex went to almost 18,000 levels on May 5.  Now we have been drifting again and I still maintain that the Indian markets will go lower. The only people in the whole world who don’t understand that the economy and the equities are moving in different directions are Indian investors, they say the economy is strong and is growing rapidly. The economy growing strong and growing rapidly has nothing to do with the performance of the equity markets.

Q: What about the role that the crude prices have played in it up until now for many markets both developed and developing and where do you see that market headed?

A: Crude is at USD 135 per barrel we have gone up 12-times since 1998. I personally would not buy oil here because I think a correction is overdue. But in the long run I cannot see the demand declining too much. Although some countries have alternate sources of energy, the demand in some countries like India and China will continue to increase. OPEC and other oil producers cannot increase their production significantly. So I think in our lifetime we will never again see oil.