See significant inflows in high beta EMs: Macquarie Sec

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Asian stocks rise on US jobs, consumer data 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: It seems the problems with Greece will get resolved one way or the other. Has that taken the sovereign risk out of the global equity system or are there lingering concerns with Portugal, Spain and what might crop up next?

A: Not at all, I think what it has done with sovereign risk is it has pulled it back to the forefront. We haven't seen sovereign risk at the forefront of the global capital markets, since the mid 1980's. Hence, we have had 20 years of reasonably blissful sailing, if you like in relation to sovereign risk and really not having the focus on it.

It is back in the forefront. I think Greece has simply led that issue back to the forefront. For many people its tip of the iceberg that is the way they are looking at it. So there are real concerns of other areas of the euro sector. There are also concerns about some emerging market areas as well.

Obviously, India and China weigh down the risk profile in relation to sovereign risk. This is where we want to keep them and that is why they are going to be the focus of this re-alignment global capital flows along with some obvious recovery in the US asset markets by safe haven flow.

Q: Up until now its been a little trickier for emerging markets and a lot cleaner for markets like the Dow and S&P. What are the chances that this turns out to be not so great year for emerging market like ours and actually stronger for the developed lot?

A: For the developed lot to be stronger, it really needs to see a surprising robust recovery in the US. We would certainly need to see stabilization in the euro area and Europe, generally in the UK. This is not in the offing at the moment or it doesn't have a high probability. The smart money is going to be on way the global growth leaders allocated and that really still is India and China in terms of the major markets.

My suspicion is we won't see the developed lot coming to the fore and out performing in that regard. It will only be on a desperation trade, if that happens, it will really be on a big turnaround in terms of risk aversion and as safe haven flows which traditionally have supported US dollar denominated assets.

Q: What is your call on commodities from here? Do you see the possibility of crude heading to USD 90 or 100 per barrel at some point in 2010 because countries like India would be watching such developments very closely?

A: Yes I do and with that wanted to preempt my analysts we are about to announce a major review commodity forecast including crude and natural gas. Suffice to say that most people who have know my commentary would know that I am actually bullish on that front. Those reviews would reflect that. I do see the prospect of a move towards the USD 85-90 per barrel. I have seen that for some time.

The news of China beginning to replenish or rebuild strategic stockpiles of commodities is an important signal. In relation to that support we are going to see in commodity markets as we move forward. There is strength of the emerging markets in greater Asia gives us a very strong underpinning. So the awareness that is going to emerge in commodity markets is that the world is moving on beyond the issues in US and Europe. Therefore, the base demand of commodities is unlikely to be dragged down as a consequence of that continued meandering in those developed economies.