India's growth supports current valuations: JPMorgan

Excerpts from Your Stocks on CNBC-TV18 Watch the full show » RELATED NEWS Mkts may dip in Oct, rally again at yr-end: Marc Faber Volatility will be the theme for next 2-3 yrs: Religare Cap Mkts may pause on soft global cues ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets

Q: One positive factor that we have been dealing with up until now has been the way the flows have panned out. There is a view in the market that because of not too much clarity in the developed economies, in terms of an economic outlook, a lot of the hot money is now moving into spaces like China and India. Do you think a trend like that would continue from hereon?

A: I would take issue with the phrase hot money. What we are seeing is in pension funds and endowment funds, this is money with a very long-term investment horizon are buying into emerging markets including India and they are paying out for growth with the view that they would get rewarded over time by investing in high growth companies. I think the interesting trend is that the flow of the FII level is very long-term in nature rather than 'hot money'.

Q: If indeed markets like ours don't see such a big global tremor and the domestic growth continues for a market like ours how do you think we could end the year? Perhaps there would be an uptick from where we are currently sitting?

A: Absolutely, I think markets will drift higher if we don't see this correction in commodity prices. If we get the correction in commodity prices then the Indian market would fall but I think then rally sharply after that fall. I certainly expect the Indian market to be higher by the year end as I expect number of other key emerging markets, including Association of the Southeast Asian Nations (ASEAN), Turkey, but I don't expect particularly good performance out of the big emerging markets such as Brazil, Russia and China.

Q: For market like ours are you anticipating any grave change in the kind of monetary policy that we currently have?

A: Currently the RBI is being very considerate in its response to monetary policy, in its response to the high level of cost-push inflation. I don't see any change in that view. We do expect the repo rate to go up by 25 basis points (bps) at the next meeting but that is a very modest increase, relative to India's nominal gross domestic product (GDP) growth. If we are to see a change in policy, the conditions would be higher core inflation and very strong credit growth. As of now those conditions don't exist. I am not particularly worried about monetary policy.

Q: Which would your favourite markets be apart from India?

A: We also like the ASEAN region particularly Thailand, the Philippines and Malaysia. We are overweight Turkey and my favourite cyclical sector at this moment is technology. Tech stocks are very inexpensive, growth expectations are low and we are seeing numerous demand drivers out there such as tablet PCs like the iPad. We are seeing huge demand for bandwidth and we have got upgrades at cellular networks. Some of the key countries like India and China have just been awarding 3G networks. That is going to be good for tech hardware spending. So I like Tech, which makes me like Taiwan.