QE unlikely soon; monsoon may trouble Indian economy: Jeff

Unsatisfactory monsoon in India would create another problem for the country and we are clearly waiting for some policy measures; diesel price hike is not happening from long time which is the need of an hour. I think quantitative easing will happen, which is a sort of icing on the cake. But, nothing will happen either today or in the very short-term.

Below is the edited transcript of his interview.

Q: Would you lay great store by what Ben Bernanke has to say? Is it likely that he might announce hinting at quantitative easing?

A: Bernanke will hint at something but it is difficult to say if he will implement anything. The current problem that he has is that although the US numbers and retail sales are weakening, they are not at the stage where the economy has so long falling back into recession. So it's not too hot or too cold and it’s not cold enough for him to implement any measures just yet.

Q: What is the next trigger global asset markets will watch out for? Are we going to see some important events in Europe, which might go closer towards brinkmanship or the ECB loosening liquidity for the European system?

A: People are now looking for more implementation of the policies which was formulated in the Summit last month. The other thing that the market is watching is that we are in the middle of a soft patch in the US and China is slowing down quite rapidly. The markets are looking for more stimulus measures both from China and the US at the moment.

Q: What are you looking out for in terms of constructive news flow and triggers from Europe?

A: It is important to see how the SM (stability mechanism) will now operate and see in which context the central bank or from central perspective money will be given to the banking sector rather than it being directed via the state. If that is formalized, then the market will certainly stablise in the short term.

Q: How would you place the Indian market at this point and if there is a possibility of QE3 if there is some quantitative easing which is announced?

A: The markets have rallied well and in fact it was oversold a couple of weeks ago. Unsatisfactory monsoon in India would create another problem for the country and we are clearly waiting for some policy measures; diesel price hike is not happening from long time which is the need of an hour. I think quantitative easing will happen, which is a sort of icing on the cake. But, nothing will happen either today or in the very short-term.

Q: There are some comments that there is improvement in the Indian macros, CAD is lower than the 4% plus that was a hit in FY12, trade deficit and inflation coming down. Do you think there is more scope for improvement with the new FM? 

A: All of that is hope rather than expectation. Oil prices coming down is helpful but at the end of the day real policy measures whether it’s a diesel price hike or specific measures introduced by the new finance minister are important factors to look out for. I think the micro situation will get significantly better from here.

Q: Many hopes are placed on post July 19 period or the week following it being the presidential elections where bipartisan voting will be hoped for by the ruling coalition thereafter if it doesn’t come will it break the back of the market?

A: I am not sure if it will necessarily break the back of the market. Certainly, expectations are pretty low as nothing has really happened so far, but clearly it will not send the market up. And if there is no or little policy announcements there is infighting people will say (big yawn) - its India again.

Q:  What is your expectation on Brent crude prices going forward?

A: On one hand demand even in weakening economies is not much strong and so that will keep a base on the oil price and on the other hand there are some tensions in the Middle East. Syria looks to be blowing up again and the Iran situation always is a worry. So, I think oil price between USD 95- 105 per bbl is something that will be over small period of time.

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