Difficult to advise buying India, sell-off seen: Jim Walker

Global market equities are unlikely to come off sharply in the next three months. Though the structural fundamentals of many markets have not improved yet, the bullish sentiment is aided by easy monetary policies, says Jim Walker MD, Asianomics.

“October-December has been seasonally very good for global equities. Also, the global economy in growth terms doesn’t look too bad,” he told CNBC-TV18 in an interview. Meanwhile, Walker is not too bullish on Indian market. He feels it is difficult to advise clients to buy the Indian market now given that the economic growth story is stuttering and equities are likely to remain bipolar going ahead. “Foreign investors have a cautious stance on the Indian market. We expects a sell-off and would be a buyer in Sensex at 16,000 levels,” he added. Sharing his views on the two key events in the US, Walker said that the US debt ceiling should not be extended any further. He believes that the on-going shut down is not a negative as it will help curtail additional public spending. Given the uncertainties over these issues, QE tapering will get extended into early part of 2014, he added. Also Read: Nifty won't break 5700; buy midcap PSBs, avoid HUL, says Quantum Below is the edited transcript of Jim Walker’s interview with CNBC-TV18 Q: From now until the end of the year do you see a period of serious risk aversion in global equities because of the way events are stacked up in the US or are you confident that emerging market equities at least will continue to move higher? A: This is normally, seasonally a pretty good time of year for the equities as we move into October-December, so there are pretty strong seasonal fighters plus the global economy in growth terms does not look too bad at the moment. People are relatively optimistic about Europe which I think is a bad mistake, but it does not matter. It’s hard to see equities coming off sharply in the next three months; I don’t think there will be any policy moves that really undermine the equity markets. If US government shuts down then everybody is going to assume that the Fed is going to print more money which is what equities are living on and feeding on these days. Q: What is the characteristic of the global equity space now? Is this still structurally bullish equity market where the best strategy would be to buy on every dip? A: Structurally bullish, I would say it is policy bullish that is the characteristic of all of these markets just now; they are bullish on the back of very easy monetary policy not on the back of a structural improvement and corporate fundamentals and economic growth fundamentals quite reverse. So, the question is how long we can see such easy monetary and fiscal policies persisting and they are certainly going to persist for the next three months probably the next year anyway. Q: That seems to be the consensus view that tapering will get pushed back further now with the US government shutdown. Do you think it will get delayed to December? What are we looking at in terms of tapering, early 2014? A: It could easily be extended in the early part of next year, December. It will be a difficult Federal Open Market Committee (FOMC) meeting to announce a tapering because the Fed Reserve Chairman is going to change in February, I doubt if the FOMC is going to change course before the Fed Chairman or Chairwoman takes over. We continue to see this policy on to the New Year and especially so if the government shutdown continues. Q: If this liquidity does continue as you mentioned, would you think Indian market will continue to move higher because the fact is that this market has been moving against all fundamentals? A: When we look at the Sensex, it is astounding how high the Sensex is, but as a bifurcated market in India, the top quality stocks seem to do incredibly well, the Sensex does well and many other stocks are doing extremely badly. I would always focus people's attention on the fundamentals surrounding the market and the fact is that the India economic growth story is stuttering. The fiscal position continues to be poor, monetary policies getting a bit back of track with the new Governor and that is going to remain relatively tight over the course of the next few months. It is very difficult for us to be saying the foreign investors that its time to pile into India even though at 62-63/USD on the rupee we think the currency is cheap. We are cautious on India for now. We think eventually when the growth fundamentals translates into profit realisation there is going to be a selloff in Indian market and that is going to be the opportunity for foreign investors in particular to get in.