Inflation not good for stock markets: Julius Baer

Speaking to CNBC-TV18 Nimeesha Takalkar, Equity Research Asia at Julius Baer says that inflationary environment is not good for stock markets.

She further adds current headwinds are from high oil prices, other input costs being high and the tightening of the monetary policy.

Excerpts from CNBC-TV18's exclusive interview with Nimeesha Takalkar:

Q: What’s your call on the entire Asian pack right now and what do you advising your clients where to stay put and where to come out from?

A: The consensus of EPS growth forecast which was early at 10% has now dwindled to 6.7% for Asia as a whole. As we all know China has recently signed contracts with Rio Tinto of Australia for 97% year-on-year hike in ore supply prices. These factors whether they are a proof of inflation or whether they are indicative of future higher inflation is yet to be seen but what we do know is that inflationary environment is not good for stock markets. Current headwinds are from high oil prices, other input costs being high and the tightening of the monetary policy.

We see that consumer confidence is dwindling. For Asia and India in particular, the earnings always came from high volume play and low input costs. If the current environment is not supportive of this we do expect further earning downgrades as well.

Q: Any possibility of a value buys emerging in some sectors in Asia?

A: Little early to say this because whether the deceleration in growth of earnings is going to move into negative territories will depend on how quickly the input costs begin to reverse back, how quickly the cost of funds begin to reverse back and therefore how quickly consumer confidence rebounds. So it is little early to say that we are looking at value plays, even by sectors.