See further run for gold, may touch $1500/oz: Macquarie Sec

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Nifty to test 5500 post 5-7% correction: JM Financial Mkts to remain strong; bet on midcaps: Ramesh Damani 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 Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

Q: Given what you just said, how would you tactically be positioned between now and the year-end? Would you be more in equities than cash and would you then still play high beta versus defensives?

A: I would remain fully invested and certainly wouldn't be going to the defensive side at this point in time because I think one would be missing out on quite a bit in to the outturn of 2010 in relation to opportunity cost. I would be looking at mid-cycle cyclicals now rather than early-cycle growth cyclicals. So a little bit more of a focus on cash flow, sustainability in relation to the sectors and companies we're looking at but certainly would not be taking a lot of money off the table in relation to cyclicals versus defensives at this point in time.

I think there's still potential energy and resources side, and some of that will be influenced by Copenhagen and of course on the industrial side, as we continue to see the expansion of domestic demand in emerging economies, India and China in particular, I think we've got further to run on that side as well.

Q: On India and China which you just spoke about how would you respond to the kind of paper, which is coming in from QIPs and IPOs in both these markets? Do you think they might limit the gains in the secondary market or do you think they might just be easily absorbed?

A: Some of that release of paper has been consequent of government's corporatisation and privatization initiatives. That's been well received both from a deregulation perspective but also market development perspective as well and investor selection base. So I think that's been good. We have to understand that we do need to see an increase in the amount of paper on issue to get that depth on liquidity that we are seeking in both Chinese and Indian capital markets as we move forward.

That's going to be absolutely intrinsic in relation of both of the jurisdictions playing leading roles, in relation to global capital flows and capital allocation as we move forward in next 5-10 years. So I am happy to see that and I am happy to see that as a, I suppose, a follow-on from the global financial crisis because I think it is a recognition of the increasingly the leading role being played by the Indian and Chinese economies.

Q: If your call is though that you see a 5-7% cut in the dollar from here, what might that mean for emerging markets because we have moved in perfect inverse correlation - the dollar falls, emerging markets rally?

A: We are still seeing investors wanting to diversify that capital risk in particular to US dollar denominated assets. So what it means is that we are continuing to see a chase in relation to global capital allocators of non-US dollar denominated assets - both fixed and portfolio and on the portfolio side that does bode well for emerging markets. And bear in mind also, that emerging market debt and debt levels at very reasonable levels relative to history.

So we are not concerned about sovereign risk impinging here. It's really more market accessability, market liquidity risk that we have to be concerned about and also whether we start to stretch valuations beyond what is reasonable even in high beta markets as you pointed out earlier.

We have to accept that we are dealing with large high beta markets and we are going to see disproportionate price movements and we are going to see more cyclicality in relation to market performance.

Q: So how much more from here - another 10% rally likely for emerging markets or would you call these levels the top?

A: I think a 7-10 percentage point rally certainly likely and I would think almost nearly follows if we were to see the dollar down further. I also think that we would see a run on precious metals - notably gold. I think 5-7% further down leg on the US dollar would entertain gold price levels of USD 1,500 per once.