Eyeing interesting bets in India and China: Robert Doll

Robert Doll of Nuveen Asset Management told CNBC-TV18 that one should invest more in equities as he feels that the US economy is set to improve in the recent future and one should hold their way through the slump.

He added that given the difficult times for the US market at the end of May and in early June for equities, there is an attitude among the investors in the US to be risk-off or buy defensive stocks. On emerging markets Doll said, "I am more interested in Asian-Pacific rim; the countries that serve India and China and some others. I think there are some interesting bets at this point." Speaking on the US and the Federal Reserve's liquidity programme, he said chairman Ben Bernanke's statements were only to assure the investors and the exact time from when the recovery would begin, is unknown. However, he hopes and expects the US market to be slightly toppish as it has been in the first half of this calendar year. He also expected the dollar to have an upward movement.   Also read: US mkts end lower amid worries over Fed bond-buying policy Below is the edited transcript of his interview to CNBC-TV18. Q: It has been a difficult tail at the end of May and stepping into June for equities. What is your sense of what is happening and whether there is a larger wave of risk-off in the system right now? A: There is no question. You have pointed out some things that have gotten pretty volatile. You may want add the rise in treasury rates in US to that list. Markets don't like volatility or things that move quickly. We may have a digestion period. In the strong cyclical phase of the bull market, we have seen corrections tend to be a sort of sidewise action. I remember well from early March to mid-April, the US stock market for that six-week period went nowhere. It was stuck at that 1,550 S&P. Maybe we get stuck at 1,650 for a while and then consolidate some of the big gains we have had as we contemplate some of the uncertainties you just put on the table. Q: There seems to be some concern on whether or not equity is the best instrument to approach asset classes in the next couple of months. What would you say for people who want to invest in equities and whether this is still a good time to buy the dip? A: My view is that equity is still the asset class of choice and I don't contemplate enough of a pullback that I want to get out. As a result, I am willing to take a little bit of a lump if that is going to come and hold my way through. The US and global economy continue to improve at a modest but acceptable pace. Despite the noise about the Fed, we have central bankers all around the world, notably the US, the European Central Bank (ECB) and more recently the Bank of Japan (BoJ) out there, with the accelerator to the floor, working on reflationary activity. Q: Talking about emerging markets (EMs) where performance has been lagging some of the developed peers. How are you feeling about emerging markets as an equity basket, especially market like India which has been pulling quite a bit of money? A: As a US investor, by choice is to get exposure to emerging economies is the multinationals, which I endorse and also to try to pick some good emerging economies and their equity markets. The Brazil, Russia, India, China (BRIC) countries have had some issues here in the last months, not to exclude India. It is going to take a bit longer before we see health restored there. So I am more interested in Asian-Pacific rim; the countries that serve India and China and some others. I think there are some interesting bets at this point. Q: The big question mark especially in the US has been grappling with is what exactly happens with the Fed and their liquidity programme and how soon that begins to get turned around. What is your view on that? A: I would make a couple of points. First, a lot of people looked at Ben Bernanke's comments last week and only looked at the second half of the sentence, i.e. we will consider pulling the pace of bond buybacks to a lower level. Before the comma, he said if and when the economy is strong enough. People ask me when you think Fed is going to stop buying USD 85 billion a month and lower it to USD 84 or USD 50 someday. I say I know exactly when. It is when the economy is strong enough and I don't know when that comes. I don't think they know it either. They are just telling the market that we are not going to be there forever. If the Fed goes from USD 85 billion to USD 50 billion a month, that is still massive ease along with zero interest rate policy. So, I am not overly concerned. If we get there, the economy is doing a little bit better so I want a little more cyclical in my portfolio and a little bit less defensive stocks. _PAGEBREAK_ Q: There is some discomfort with the amount US markets have rallied in the first half. Are you calling for more strength going into the second half or do you think too that markets are beginning to look a bit toppish? A: The S&P 500 this year is higher than what most of us thought on January 1. So I would be shocked if the kind of gains we saw in second half different from what we saw on the first. If we can hold what we have built upon and make a little bit gain, it would be a phenomenal year. I wouldn't be a hero. I do think equities will still outperform other things because the cash, at least in the US is returning zero and bonds are likely to continue to have that slow but noticeable interest rate increase headwind. So, in the financial asset category in the US, stocks are still the choice. Q: Where you see dollar headed as well in the second half because that has big ramifications for emerging markets such as ours. Do you believe the dollar is set for a path of more strength? A: I think the path of least resistance to the dollar will continue to be to the upside. One of the conundrums for me has been that the dollar has not done better than the euro, maybe which is still coming. Given the US has lived up to the low expectations the world has for us in terms of economic growth, the US has done some improvement in terms of the Fed budget deficit cyclically. It means the dollar has probably got some more upward movement to go. Q: For a while market performances got interlocked. But they are becoming disparate between Asia, euro zone and the US. Is it your belief that developing market and emerging markets can move hand in hand in the second half or do you think performances will become much more individual in nature? A: Off late, it is the developed markets that people have been most interested in; especially the US and until most recently Japan. My view is consistent with wanting a little more cyclicality in the portfolio. I want some EMs as well. If the US and global economy picks up a little more strength, and there are more indicators in that direction than the opposite, I want a little more EM exposure in my portfolio.