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Hans Goetti of Finaport says despite a host of negatives like fears of drought, negative impact on growth due to power outages, wobbly political scene at the Centre, slowdown in consumption etc, Indian equity market had held steady.
The month of August has been particularly good for India, which has surprisingly outdone most of the emerging markets. Speaking about the domestic markets, Hans Goetti of Finaport says India had seen a lot of inflows from foreign institutional investors, which are driving equity prices.
Goetti says despite a host of negatives like fears of drought, negative impact on growth due to power outages, wobbly political scene at the Centre, slowdown in consumption etc, Indian equity market had held steady. Obviously equity markets have discounted these negatives and "that makes us optimistic on India," he told CNBC-TV18 in an exclusive interview. He advised investors to look at financials, despite the current interest rate regime.
Globally, he believes equities are trading on hopes of more quantative easing (QE) coming out of the US and Europe, however, the likelihood for one in the near-term looks bleak. He recommends defensive stocks with high earnings visibility and the potential to increase their dividends.
Here is the edited transcript of the interview on CNBC-TV18.
Q: I will come to you with regards to all of the macro data that actually came out from the US, which was completely mixed and do you think that there is a lesser probability that the US Fed will possibly move in terms of quantitative easing and what is the necessity of quantitative easing at this point in time?
A: The data that has come out over the last few days has indeed been mixed. We are still looking at a relatively weak economy even if certain indicators are pointing upward over the last few days. We are still in a deleveraging cycle, which is going to last probably another 3-5 years.
That hinders growth from taking halt. Again, you would be talking about 1.5% growth despite the fact that we have had record fiscal monetary stimulus. That's not very strong. So, we think the fed might actually opt for more QE. But, at this point in time maybe the obstacles are a bit higher because the data is not as weak as it should be for the Fed to embark on QE. But, we think that over the next few quarters, QE will be inevitable as the economy slows even more into 2013.
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