SENSEX NIFTY
Oct 17, 2012, 01.41 PM IST | Source: CNBC-TV18

Indian equities to lead EM performance: Macquarie

Since the Spanish denial for bailout has taken so long, Richard Gibbs, Global Head at Macquarie Securities believes that when the bailout package is finally out, it will not have the positive impact on markets that one is hoping for.

Since the Spanish denial for bailout has taken so long, Richard Gibbs, Global Head at Macquarie Securities believes that when the bailout package is finally out, it will not have the positive impact on markets that one is hoping for.

According to Gibbs, QE3 and the liquidity measures by other central banks around the world have made it tempting now for investors to look at profit taking. “Investors will most probably want to go to that seasonal downturn in market liquidity and trading in an environment where they are pretty much squared in terms of positions. This means that we are likely to see some profit taking,” he said.

Also Read: Expect Nifty to settle around 5550 levels: Anil Manghnani

Gibbs feels that emerging markets (EMs) are likely to outperform the developed markets through the remainder of this year since they are the greatest beneficiaries in terms of any further global liquidity easing.

He further goes on to say that the Indian market will probably lead the pack in terms of emerging market performance.

Below is the verbatim transcript of the interview

Q: There seems to be some hope that Spain might finally ask for a bailout. Do you think that’s likely, and is that something, which will make the market happy in the near term?

A: The markets will certainly be happy to see the end of Spanish denial. I think we have reached a new high in terms of Spanish denial about the need for an economy wide bailout. And this is what we are now talking about, not just for the banking sector but for the whole economy. My concern is that since the denial has gone for so long, when we finally get the bailout package, it will not have the positive impact on markets that we were hoping for.

Q: There was some progress apparently in Greece as well, which has been simmering on the margin. Do you think there is any breakthrough finally in Greece with what you heard yesterday?

A: I think they will because they are pretty much locked into the process of reforms. I think they are pretty much resigned to the austerity measures at this point in time. That is not to say they are disruptive and dislocated in their impact, but at the end of the day, this is about reconstructing the Greek economy, and that has to be done in a much more productive and income producing manner.

Q: Do you think the developments in Spain and Greece overnight might spark on another phase of risk-on in global markets or do you see the next few weeks or the end of the year bringing about a lot of profit taking?

A: QE3 and the liquidity measures by other central banks around the world have made it tempting now for investors to look at profit taking. They have driven renewed rallies in a lot of markets, particularly developed market segments. As a consequence of that, we are seeing some stretched valuations. Obviously, investors will most probably want to go to that seasonal downturn in market liquidity and trading in an environment where they are pretty much squared in terms of positions. This means that we are likely to see some profit taking.

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