Baer Cap cautious on India, overweight on FMCG & pharma

In an interview to CNBC-TV18 he says, "I think if some of the factors cause a risk-off trade, then you could potentially see very easily a 20-25% downside in the Indian markets in a very short period of time. But again that is not my base case."

Investment, during FY12, dropped by a whopping 46% to about Rs 2.1 trillion from Rs 3.9 trillion a year ago.

According to Sama, the perfect storm for the Indian equities would be continued inaction by the policy makers, potential downgrade and continued rupee depreciation.

As an investment strategy, he has defensive stance with overweight on FMCG and Pharma.

Below is the edited transcript of his interview.

Q: What are your expectations from Jackson Hole - do you think it might be a powerful propellant for more risk-on starting next week?

A: Mario Draghi will not be there nor are the senior members of ECB executive council. So the focus will on Jackson Hole and the noise coming out of Ben Bernanke. Our base case is that the Fed is, by and large, committed to further easing. Unless there is a clear signal in terms of an improvement in the employment picture and the growth picture, the Fed is down the track for monetary easing, and to a great degree, that has already been factored into the market. I think the markets would be disappointed if the Fed didn't follow through.

With respect to the ECB and their plans on bond buying, setting targets, which they may or may not announce publically and what they feel the boundaries for Spain and Italy, for example, is what we are much more focused on.

And my base case for Europe is a muddle-along scenario. I think the ECB is moving in the right direction. Even though there are the pure monetarists within Germany who are not supportive of bond buying, there seems to be an agreement between the ECB and the main protagonists in Europe with respect to a bond buying program as long as there is a commitment towards fiscal reforms.