See Sensex weakness as good buying opportunity: StanChart

Standard Chartered is structurally bullish on Indian stocks on the back of reforms which will significantly lead to softer inflation and a positive environment for the market says Steve Brice, Chief Investment Strategist at Standard Chartered Bank.

Speaking to CNBC-TV18, Brice says Sensex may see some short term weakness in the immediate future and there exists a good buying opportunity for the investors.

However, talking about the prefered markets, he picks Europe and Japan in the global markets and China and Taiwan, within Asian markets.

A: We are seeing mix performance but generally I see a red across most of Asia at the moment which is not too surprising. S&P Futures is down as well. So in some ways we may be looking at this as a positive in a couple of weeks time but in the short-term clearly the risks of a Grexit and a messy one of that have risen significantly over the weekend. So, people are taking a little bit of risk off the table this morning. It is certainly not a panic but it is certainly indicative of increased concerns short-term.

A: People obviously do not like uncertainty, so from that perspective, that is where the short-term weakness comes from. But, in the longer-term we do not believe that Greece is that material in terms of the economy. The inter-relationships between Greek financial system and Greek bond market and the international environment is being delinked very significantly. So, from that perspective, you may think that we are all being complacent and who knows, that may be proven to be correct. But it is difficult to see where the transmission mechanism is going to come from given around 80-90 percent of Greek debt is owned by official institutions rather than superior private sectors. So, yes, there is short-term uncertainty, but it may actually be positive if it leads European Central Bank (ECB) to increase liquidity into the banking system outside or will bet that markets outside of Greece, that might actually reinforce the upswing in economic cycle what we are seeing in Europe at the moment.

A: After a period of weakness we are seeing some people becoming more constructive. I am not sure how much of that is structural, how much of that is reduced concerned about the monsoon season and how good that is going to be but we have seen some people starting revise up their expectations for Indian equity markets as well.

Overall, very similar to what we said on euro, we are structurally bullish on Indian stock market. We believe that the reform agenda is going to be very significant leading to ultimately stronger growth and lower inflation and a great positive environment for equities. However, the path to that is not going to be smooth and we have seen that over the past three months or so.

However, looking into very immediate future, the Sensex is approaching key resistance now so we may see some short-term weakness in line with what has happened with Greece. However, significant weakness should be a good buying opportunity for investors in our view.

A: In terms of the short-term or the Sensex of India, we are going to really struggle to see it above 30,000 by the end of the year. So, you may get better buying opportunity in the interim, maybe down towards 27,000. In terms of mixed markets, [in] global, we still prefer Europe and Japan equities on a currency hedge basis. We believe that Europe is one of the few regions that have seen upgrades to consensus growth forecasts this year.

And we see that trend as being very supportive against a backdrop of weaker euro as well. Japan’s earnings revisions [is also] positive there, similar to Europe; that is a positive aspect. Within Asia, China and Taiwan are our preferred markets.

Obviously China is going through a difficult period at the moment, but we are seeing increased measures aimed to support in the stock market and after a period of strong out-performance for 12 months and strong underperformance over the last month, we do expect the situation to stabilise ultimately and the markets move higher.