Expect Indian markets to consolidate ahead: RCM

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Though the US markets were successful in breaking out of its five-day losing streak, Mark Konyn, Chief Executive Officer of RCM feels that they will begin to get used to the fact that the prospect of a slower performance of the economy there in the second half of the year was pretty much on the cards. "Also, Fed's commitment to maintain its balance sheet at current levels and effectively provide more stimulus, on monetary side, will encourage investors to take more risk and to help pop up the economy while it is going through this soft patch."

On the local footing, Konyn sees some mild consolidation. "It's going to be harder going in the second half of the year than it has been so far this year for the Indian markets."

Commenting on Chinese market, he says, international investors are underinvested in China. "We see more upside potential than downside risk for the remainder of this year in China."

Here is a verbatim transcript of the exclusive interview with Mark Konyn on CNBC-TV18. Also watch the accompanying video.

Q: US data is very mixed, one good number and two bad numbers. Some say equity markets are not adequately pricing the bad data. How do you see US markets for the rest of 2010?

A: I think this is double edged in the sense that markets will begin to get used to the fact that the prospect of a slower performance of the US economy in the second half of the year was pretty much on the cards. We saw the Fed statement in the previous Federal Open Market Committee (FOMC) meeting already start to say expectations and downgrade the outlook for growth. The follow up numbers that we saw in the jobs markets have confirmed that.

On the one hand, confirmation of a weak economy is bad news for investors. But at the same time the Fed have come out and found middle ground in the sense that they have shown commitment to maintain its balance sheet at current levels and effectively provide more stimulus, on monetary side, to encourage investors to take more risk and to help pop up the economy while it is going through this soft patch. So it's a mixed view at the moment. The negative aspect was expected, but we have seen somewhat of a response from policymakers, which should be enough to encourage risk takers as we move through the second half of the year.

Q: What is your call on the Indian markets? There is a broad view that Indian markets are richly valued. Would you agree or would you advise buying now for at least the longer term?

A: It depends on the outlook, obviously on how long you are planning to be exposed and what the objectives of the investment are. Our view is that Indian economy will prove to be self correcting in some of the overheating that we are seeing, whereas the RBI has been a little bit behind the curve. The self correcting manner of the slowdown should take some of the heat out of the economy. Hence, we expect the second half of the year for the Indian stock market not to be as high performing, although from the bottom up perspective we have been quite encouraged by some of the earnings reports that we have seen coming through. So, far we have been wrong, we were expecting the markets to bump up against an upper limit, but it is continuing to maintain momentum. However, we maintain the view nevertheless that it's going to be harder going in the second half of the year than it has been so far this year for the Indian markets.

Q: What is the way forward for the Indian markets? Is it going to be a consolidation?

A: So far the Indian market has really confounded that the view. But the closer we get to the end of the year, more likely that view is going to be realized, particularly as we are seeing some pockets of inflation beginning to show through and sooner or later tightening either defect or through policy measures will take hold. So, yes, there is a chance that the markets will suffer some mild consolidation.