Indian equities are attractively priced at the moment but investor focus has started to shift from the Indian market to the ASEAN region, says Richard Titherington of JPMorgan Asset Management.
In an interview to CNBC-TV18, he adds that the Indian economy is expected to recover from the second half of the current year of 2013 onwards.
"I expect the Fed to start tightening policy in next few months as it faces less pressure due to recovery in the US economy."
Below is an edited transcript of the analysis on CNBC-TV18
Q: What do you think has been the problem with Indian markets which have started to underperform?
A: Indian equity markets are been under pressure for two reasons. The obvious and increasing concern about political developments in the country and the shift in focus towards growth prospects in the ASEAN region. In my perspective, the political developments, though significant in the short-term, do not really affect the long-term attractiveness of Indian equities. The selloff witnessed recently provides a buying opportunity because I still think that the Indian economy will be recovering over the next few years. So, Indian equities are attractively priced right now.
Q: What do you make of the situation in Cyprus and does it have the potential to cause a much bigger impact on the eurozone and dent global markets?
A: Although Cyprus is a very small economy and the sums being talked out for the bailout are not significant to European context, the unusual measures that are being adopted clearly do have consequences for the rest of the eurozone. Investors have been unnerved by the deposit levy which represents a departure from practice over the last few years.
Q: What is your take on the situation in the US equity market which seems to be in a bull run?
A: As the US economy recovers, the Fed is under less pressure to continue maintaining a very loose monetary policy. So at some point over the next 6-to-12 months we would expect the Federal Reserve to start tightening monetary policy.
Q: A lot of India watchers seem quite disappointed with the way the economy has shaped up this year. How concerned are you about the macro-economic situation?
A: When I look to the rest of the year, I would expect the Indian economy to recover in the second half of 2013. I certainly do not think that inflation will be a problem in the near-term. Consequently, I think that the Reserve Bank of India (RBI) has further room to ease policy.
Q: As an investor how do you read the fall in the markets during the past few days?
A: Although there are short-term uncertainties about the valuations of the Indian equity market, I think this marks a good entry point for buying Indian equities, particularly at a time when investors are starting to focusing on Southeast Asia. We are adding to our exposure in India right now.
Q: What do you make of the increased confusion or uncertainty caused by the current political scenario?
A: Political uncertainty is never a positive for reform. For India to achieve its potential, it political reforms are required. In the long-term, reform is inevitable and the government will do as much as it can to make the necessary changes in the run up to the next elections.