Neutral on India, rally led by global market: Deutsche Bank

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Though most of the experts and investors are bullish on India, John Paul Smith, global emerging market equity strategist of Deutsche Bank holds a different view. He is neutral on India as compared to the rest of the emerging markets.

In an interview to CNBC-TV18, he said that the rally in Indian market is only led by the global market action and movement in rupee.  Infact, he does not even prefer any of the BRIC countries especially China.

However, in the same breathe, Smith adds that the emerging market may see some upside in the first half of 2012 as there is a huge inflows.

Meanwhile, he is worried about the European markets and points out that the issues there are not purely confined to Greece but the key concern is over lack of real growth in Europe.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: We have had ample liquidity over the last few weeks. How much more do you see over the next few weeks that can drive global markets even higher?

A: We are certainly seeing a very strong liquidity driven rally and really that reflects just how risk averse most investors were couple of months ago, both in terms of the amount of cash they held and also in terms of where they are positioned.

My own feelings are that we are a good way through this particular move, so if I had to make an estimate I'd say we are at least 80% of the way through it.

Q: There is still some nervousness around Greece and whether that will get resolved amicably. How big a deal is it for global markets now?

A: Greece is obviously an issue which has preoccupied the market for sometime but it's interesting in the last few days we have seen sort of more granular developments in Greece not being the main drivers. What troubles me far more is this general tenure of fiscal austerity that we are seeing throughout Europe and certainly there is every chance that events in places like Italy and particularly France ahead of the elections could be increasingly unpredictable.

So I don't think the issues are purely confined to Greece. Over the medium and long term, the main issue is of course is the lack of any real growth in Europe outside the core of the eurozone, in other words Germany and Netherlands.

Q: How have you read the rally in emerging markets (EMs) and do you concur with the view that there may be a bull market run that is growing in the EMs?

A: Personally, I don't in relative terms. In absolute terms, we are hostages to what happens in the developed markets and you can see that very clearly indeed. We always like to stress the individual characteristics of the EM, for example in India the rally has been driven primarily by what is happening in global markets and the impact that has had on the rupee. It is the same really throughout the EM universe.

I think the structural negative factors still predominate across the BRICs in particular and I would far rather at the moment hold stocks in US which have much better superior cash flow characteristic than their counterparts.