It is start of a re-rating for emerging markets and the positive trade is to move out of international assets into emerging market assets, said Laurence Balanco of CLSA.
To discuss the many reports that are saying there could be a melt-up in the big global markets before there is correction, CNBC-TV18 spoke to Laurence Balanco of CLSA who have been reading the charts of these markets and some other indicators.
Balanco said expect a 3-5 percent pullback in the near-term but not a big correction for the US market, adding that one should treat this correction as a buying opportunity.
However, avoid chasing momentum in the near-term, he said.
With regards to Indian market, he said the Nifty is currently in a trading range. He has a target of 12000 on the index for H1CY18 and target of 31000 on the Bank Nifty. The stoploss for Nifty is at 10,050 and for Bank Nifty it is at 24,700, he added.
He said it is start of a re-rating for emerging markets and the positive trade is to move out of international assets into emerging market assets.
Talking about other asset class, he said resistance level for crude is around USD 60 per barrel.
For gold, for past five years it has been consolidating below the USD 1370-13880/ounce resistance zone and so for the first half to this year, it would remain range bound below this resistance area but from a longer-term perspective and two years of ranging below that ares has put in a base that suggests an upside target of USD 1800 per ounce.
When asked if sell the US dollar and buy commodities, which was the biggest trade for last year still holds, he said the dollar index has been in a bull market since 2011 and on an average US dollar bull markets last seven years. So, the base case for 2018 is that the dollar confirms a major peak and weakens from here. Therefore a seven year cycle peak is due for the dollar index, he added.
According to him, the correlation between the dollar index and commodities has diminished, so each commodity should be treated individually.For full interview, watch video