Focus shifts to EMs again; stay long on India: JPMorgan Sec

With the US Federal Reserve lowering economic growth forecast the focus will now shift to emerging markets again and open opportunities for India, Sunil Garg, managing director of JPMorgan Securities said. He advises investors to stay long on India.

In fresh quarterly forecasts, the Fed cut its forecast for 2013 economic growth to a 2.0 percent to 2.3 percent range from a June estimate of 2.3 percent to 2.6 percent. The downgrade for 2014 was even sharper. He further added that the next round of taper will happen only in December now and the US Budget discussion will be eyed by the markets now. He feels majority of the FOMC outcome has already been factored in the Indian market. Equities, currencies and bonds will rally in the short-term, he told CNBC-TV18. Though in the long run, focus will be back on core issues plaguing the country, he warned. Meanwhile, he sees the rupee going below 60 per USD in the near-term. According to him, the RBI may not unwind its tightening measures on September 20 policy meet. He sees selective buying in beaten stocks, though IT stocks may lose steam in the short-term. Also Read: Fed's move not surprising; USD to be under pressure: Pros Below is the verbatim transcript of Sunil Garg's interview on CNBC-TV18 Q: What is the sense you are going to see a huge rally on the Nifty as well, do you think 6,100-6,200 are all looking very likely now? A: If you look at what the futures are doing in Singapore, it is already at that level and we have seen a pretty strong open across the other ASEAN markets. So clearly the markets are taking much of a risk-on approach. I think on the FOMC other than the lack of tapering the most important point was that the 2016 outlook was released and the median committee participants were seeing Fed fund rates only at 2 percent by 2016. I think that is adding to the dovishness that the rate hikes are still sometime away even at the short end of the curve. Q: How do you map the flows situation now into emerging markets like India because in any case in the last couple of weeks we have seen exchange traded fund (ETF) money get pumped in, now do you think that there could be some long only participation emerge as well? A: Selectively there has definitely been a lot of beaten down stocks, value emerging and there will be bargain hunting. I do think that on broader macro fronts, the focus will eventually have to come back and probably not so distant future on the core issues be it towards inflation, fiscal deficit and possible NPAs in the banking sector, but for now in the short-term definitely it is positive for flows, positive for the currency, positive for equities. Q: Where do you see the currency, does 60/USD or even sub-60/USD look possible? A: It has been one of the toughest asset classes to call, given how volatile it has been and I think the confidence that could inject in after the new RBI governor announcing steps and I guess following some easing in tensions in Syria and now of course the FOMC positive surprise, I think that is all adding to probably further gains in the currency and seeing at least in the short-term, a level below Rs 60 is very much a possibility. But again I would emphasize that eventually we will still go back to focusing on the core issues and those haven’t gone away.