Change in Indian govt welcome; bullish on gold: Finaport

On commodities front, Goetti is long-term bullish on gold and says a rally in oil would be welcome.

Also read: Fed meet crucial for emerging market: Richard Gibbs

Below is the verbatim transcript of his interview on CNBC-TV18

Q: What is your reaction to the big move in the Indian market after the state assembly elections? Do you think the market is running ahead of itself or do you think it can outperform going forward from current levels?

A: The sentiment has clearly shifted towards politics, especially what happened in elections and it is what foreign investors wanted to see. The perception is that Narendra Modi would be the one candidate that everybody wants to peruse pro-market policies.

However, we would argue that any change in government would be turned for better in any case because there has been some political gridlock and it cannot get much worse than it already is.

So I think there would be improvement going into 2014 no matter who wins the next election and the preferred choice would obviously be Modi.

Q: Would that mean that Indian markets have excluded themselves from other emerging markets in terms of the volatility and maybe the vulnerability of any tapering talks going ahead?

A: Yes, it could be so because we have also seen an improvement in the current account deficit (CAD), which was quite drastic in India and that is something that foreign investors are looking at and there is a perception that things are improving. It is true that market has reached a new high but it could do better but the question on what will happen with taper remains. However, we think March will be the earliest time that tapering happens.

Maybe the tapering fears are not as much as they were last year and markets are content with the fact that tapering will occur at some point and the fallout this time around maybe quite a bit less than last summer.

Q: if the bond-yields in the US were to hit 3% do you think EMs and Indian market in particular can maintain the current levels?

A: 3 percent is a bit of a threshold, I think Fed would like the 10-year bond yield to be below 3 percent at least for now.

Having said that it is interesting to see in the US, the relatively favourable payroll numbers have led to a rally in the market. So all of sudden good news is good news whereas before that bad news was good news and whenever bad news occurred it would almost guarantee that the Fed would continue with QE.

Therefore, what the market is looking at right now is probably and improving economic situation; you are coming to the end of deleveraging cycle in the consumer, probably a fiscal improvement in the US and so we have an acceleration of the economy into 2014. Yet at the same time Fed may actually stay easier longer, so we could have a weaker dollar and possibly still higher equity prices.

That is the scenario for now and that plays into EMs as well; if Fed extends QE longer it could give a boost to EMs also.

Q: Do you have a view on gold and would you invest in gold? Also what are your targets on Brent Crude?

A: We are long-term very bullish on gold. Whether we have seen the bottom already is hard to tell but gold seems to be in a bottoming formation, a base building formation.

There seems to be a growing consensus that gold price will go to USD 1100 per ounce or even lower and if you have that type of negativity, chances are that we are going to hold here and can actually move higher. The technical situation is still not favourable

So, longer term it is interesting level to get back into gold and gold mining shares as well.

As far as crude is concerned, a pick up in global growth emanating from the US should put upward pressure on oil price but at the same time there is oil-share revolution in US and you have supply coming on to the markets. So any rally in oil will be welcome.