See significant inflows in high beta EMs: Macquarie Sec

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In an interview with CNBC-TV18, Richard Gibbs of Macquarie Securities, spoke about his reading for the markets.

Here is a verbatim transcript of an exclusive interview with Richard Gibbs on CNBC-TV18. Also watch the accompanying video.

Q: How high would you rate the chances that there is still a bit of large rally going for some of these global markets over the next few months?

A: I think there is still some certainly for a major prospect of a large rally in these global markets. As we come into this new week, we are looking at whether or not we are starting to see re-alignment of global capital flows, certainly after the congress meeting in Beijing last Thursday and Friday. Some soothing comments are coming out from leadership in China. Growth dynamics of India and Malaysia continue to improve .

So we are starting to see a re-alignment by global portfolio managers of their capital. This is going to start once again in these high beta emerging markets (EMs) where the growth uplift and uplift in earnings offer the most promises at this point in time.

Q: How are you reading the dollar because lot of global trade now seem to be hinching on whether the dollar index makes past 81 or it is set up for near-term correction after the rally against the euro?

A: It is a really interesting point here in relation to the dollar and whether we can see further recovery being complicated now as a consequence of the comments out of Beijing late last week and prospects that China is going to widen the trading band for the Yuan and the Renminbi and move towards some form of convertibility for the exchange rage in the next few years.

So that is also mudding the waters. The extent to which we see some safe haven flows particularly surrounding continued, fall out from the Greek debt crisis and obviously fall out into the euro area generally. This augers well obviously for the dollar and see some further recovery there on the back of these safe haven flows as people try and bank wealth to preserve that capital.

Q: Is there a year end target that you are working with for a market like India? Do you think it will be extremely volatile while getting there?

A: I think it will be volatile. You made the point about the smallcaps and the midcaps, exactly what I would expect to see in a global environment, where the focus is back on risk. Risk premiums and sovereign risks are leading that. It tends to be a market in which we see smallcap and midcaps doing it toughly because obviously are in most specific part of industry sectors. Given that the Indian market has more than its fair share of those small and midcap stocks, we are going to see a fairly rocky road ahead, but against the backdrop of an upward trajectory.

As far as Sensex is concerned, I am still targeting in the near-term over 17,500. In the year end, we could certainly see 18,500 reached and consolidated in relation to that index. For Nifty, I am looking at 5,200 in the near-term. So it will be rocky and volatile, but it will continue to be around this rising trend.