More risk-on in Europe can push our market up: F&C Invest

In an interview to CNBC-TV18, Jeff Chowdhry, head of emerging equities at F&C Investments gives his views on the announcements made during the EU summit and how he sees global markets performing ahead.

Below is an edited transcript of his interview. Watch the accompanying video for more.

Q: What have you read into the statements that have come out from the EU Summit and do you think it’s probably going to lead to a big change in terms of risk sentiment?

A: The announcements over the last few hours have indicated that we are firmly back into risk-on territory. The most important announcement which has been changed has been the announcement that there is going to be a banking supervisor for the euro zone banks i.e. essentially moving the supervision away from national banks. That’s quite a major step forward towards eventual banking union.

Q: Would you read it as another one of those risks off rallies that are short and swift in nature and should be ridden for that limited period or do you think something fundamental might be changing for the second half and dynamics for equities?

A: The history of announcements such as these has been essentially that the announcements have led to a short-term rally and then because of delays in implementation essentially those rallies have petered out. I have to say as a sort of a cynic, it’s more likely that that will happen again essentially that the rally will continue for may be a week or so and then people will say let’s have a look at the details or let’s have a look at the implementation and there is very little.

The ultimate game which is what everyone has to focus on is fiscal union. That’s what everyone will want and until we have proper fiscal union, we are going to get these risk on-risk-off rallies.

Q: What kind of approach would you take on a market like India that is sort of moving into a slightly more optimistic phase both in terms of what has happened globally and the expectation at least of something happening locally as well in terms of policy action?

A: In case of India, I have mentioned on this programme a little while ago that it has been very oversold on both domestic worries and on the eurozone crisis. Obviously, with a little bit more risk-on in terms of Europe in the next few weeks and the fact that India has been very oversold, the market is attractive and it goes up from here.