Low rupee gives brave investors a shot at market: Freeman

US markets end the week on a very disappointing session. The Dow for 2012 has tumbled into negative territory now. Key indices have seen a drop of nearly 2-3% in one session alone. The main culprit for this has been the disappointing jobs report which came in the US along with the dismal PMI data which was announced in China.

In lieu of all the negative global macro news, Seth R Freeman of EM Capital Management talks about where markets are headed going forward.

Below is an edited transcript of his interview to CNBC-TV18. Watch the accompanying video for more.

Q: Just when investors were heaving a sigh of relief that May was behind them, along comes June and what a big drop we have seen in US markets. Do you suppose this selling would continue into the middle of the month when we see the Greek elections or is the Greek problem perhaps just be an indicative problem of what’s happening in the euro zone? Could this perhaps continue much longer?

A: The Greek problem is bringing this to a head for sure and we are hearing plenty of different conflicting information coming out of Spain. Spain says they have many weeks to resolve their situation with Bankia. I do believe we will see continued selling in June for a number of reasons. The summer holidays begin here, beginning around the middle of June, late June.

Many traders will want to close out their positions or at least lighten them up rather than pile into the market. In terms of how this impacts India, it’s possible that more investors will identify the fact that the rupee is extraordinarily low and many share prices in India are quite low. So this is an opportunity for some investors who have courage to get a double gain in the future.

Q: Not just us, any which way you look, whether it’s China, the US - the economic data has been pretty weak. You have mentioned that perhaps a brave investor could take heart in the fact that at least valuations are low. In the emerging market space what is really sticking out? Is India perhaps in the top one or two picks for investors?

A: I think it should be. The real fundamentals haven’t changed this month. Internals are where they might have been a year or two ago. The key drivers remain the same. It’s naïve to believe that a growing economy is going to have a 9% QoQ. Perhaps China was an anomaly, but again China was fueled by its exports to Western countries consuming lots of cheap products, while India’s story remains a domestic story.

So, none of that has really changed with regards to 5.5-6%. That’s still pretty good compared to a 1% or maybe a negative percent in other economies. The question would be whether investors think that’s enough of a risk premium to stay invested or to add more capital into the country.