The European Central Bank's (ECB) indication that it may launch a fresh round of quantitative easing in December is likely to be a positive for risk assets, says Neeraj Gambhir, MD and Head - Fixed Income, Nomura India.In an interview with CNBC-TV18, Gambhir said he expects other central banks, such as Bank of Japan, to launch further QEs themselves. As well, this Federal Reserve is unlikely to move in December this year and the first US rate hike in years is likely to come only in March."This should continue to make asset markets quite supported," he said.The global easing events would likely to send the rupee higher but Gambhir said he does not expect the Reserve Bank of actively intervene in the market to weaken it. Below is the verbatim transcript of Neeraj Gambhir's interview with Latha Venkatesh & Sonia Shenoy.
Sonia: The topic of the morning is European Central Bank's comments of perhaps further easing in the December policy and now there is an expectation that other central bankers may follow suit as well, the likes of Bank of Japan etc. How do you think all of this will impact the fixed income market or the bond market globally?
A: We are seeing renewed set of stimulus coming from central banks and that is clear that inflation, especially driven by the commodity prices, inflation is not showing any sign of going up anywhere in the world. We are continuing to see weak growth patterns especially in Europe as well as in some of the other parts of the world. So, a renewed monetary policy stimulus, certainly from Europe, possibly some kind of an action from Japan at some point in time in future, so these are the two things which are certainly the focus for the market.
It is a sort of weak growth, very low inflation era which is continuing and we are not seeing any turnaround from this. There is an expectation and certainly it is Nomura's house view right now that Fed will not move in December and the earliest we see Fed moving is in March and that too is contingent upon data continuing to be supportive. So very high liquidity environment again and that should continue to make the asset market quite supported.
Latha: What is your expectation on the rupee going into the end of 2015 and do you think now the Reserve Bank of India (RBI) will be concerned about the rupee appreciation. Do you expect some out of the box unexpected moves other than just buying dollars to weaken the currency?
A: I do not think RBI will proactively try to weaken the currency. The strategy of intervention has been quite symmetrical. As the rupee has tended to go through strong phase as it is now and there has been sort of a dollar weakness and they have tried to basically buy into that phase and when the rupee has tended to weaken, they have let the market decide on the rupee's level to some extent. So it has been a symmetric intervention which has been driving the path of the currency. On its own rupee is fundamentally fairly strong currency; we are seeing a good current account number, which is going to be less than 1 percent of gross domestic product (GDP). There is a continuous strong flow both on foreign direct investment (FDI) as well as on foreign institutional investor (FII) front; the debt limits were completely mopped up by the market. So very strong flows continuing, the current account data is fairly decent and given all of this it is the level of intervention of RBI which will decide where the currency settles.
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