Further dip in oil prices to leverage Indian mkts: JPM

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Adrian Mowat, JPMorgan sees more pain in Indian markets until we see some stability in the global financial system. He sees further downside in terms of expectations and feels that Indian markets may underperform over a six to twelve-month period. "If we see further substantial falls in the oil price, then India will tend to be more leveraged than other markets because of the benefit that a lower oil price gives the twin deficits of the current account and at the fiscal level."

 

Here is a verbatim transcript of the exclusive interview with Adrian Mowat on CNBC-TV18. Also watch the accompanying video.

 

Q: We are back to four digits. Is there more pain to come in your eyes?

 

A: There probably is until we see some stability in the global financial system. So, we need to see interbank lending, commercial paper market working, and basic financial transactions starting once again. When that occurs, then people will wake up to an awful lot of value that is available in emerging markets.

 

The Indian story is one where growth is still too high in terms of expectations. But the market is well ahead of the expectations, and stocks have got cheap enough to deal with a lower growth story.

 

Q: I was just reading your report earlier this morning where you made the point that you see Asian equities recovering but you are still underweight on India. Do you think by way of pure stock market performance we have got more downside or more price damage to go?

 

A: You have further downside in terms of expectations, and for that reason, it may underperform over a six to twelve-month period. If you see a recovery in risk appetite, then India will bounce with all other emerging markets. If we see further substantial falls in the oil price, then India will tend to be more leveraged than other markets because of the benefit that a lower oil price gives the twin deficits of the current account and at the fiscal level.