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Last Updated : Sep 15, 2016 08:05 PM IST | Source: CNBC-TV18

Currency devaluation is a short-term fix: JPMorgan

Asserting that India‘s demographics are superb Filippo Gori — Head of Sales and Marketing, Markets and Investors Services Asia-Pacific at JPMorgan — said that stable rupee has contributed to inflow of foreign investors into India.

Asserting that India’s demographics are superb, Filippo Gori — Head of Sales and Marketing, Markets and Investors Services Asia-Pacific at JPMorgan — said that stable rupee has contributed to inflow of foreign investors into India.

Gori said the JPMorgan is positive on India and that emerging markets are likely to gain from the possibility of US Federal Reserve planning to hold the rates.

Below is the transcript of Filippo Gori’s interview to Latha Venkatesh on CNBC-TV18.

Q: Do you think we are seeing a tapering in emerging markets now? 


A: I do not think we have seen actually a tapering. If anything, morning has started to come very possibly a little bit later and I would say that in the last couple of weeks, with the hike of the Fed possibly out of the way in September, this has been beneficial again from an emerging market standpoint. So, a positive emerging market trend will remain for the rest of the year. 

Filippo Gori
Filippo Gori
Head of Sales and Marketing, Markets and Investors Services Asia-Pacific |JPMorgan

Q: Only over the last 3-4 days, we have seen foreign money into India get negative. Of course, this is a day on day comparison very short-term. Should we worry that investors are resisting 8,900 Nifty levels or will this pass? 

A: Personally, I do not think we should be worried at all. It is just sometimes, we read too much into short-term data, Jamie is a master of saying we always need to look at long-term, etc. The prospective for India is incredible, the demographics are superb, one of the reasons why we want to invest in the region is because we believe in the demographics and we believe in what the current government is doing, we are opening branches, etc. So, we remain super positive. Personally, I never look too much at short-term data to see where the business is going in the region. 

Q: The Indian currency has been among the most stable and in the process, it has become stronger than many of our trading partners. There is a strong move on the part of the commerce ministry and exporting community to ask for a devaluation of the currency. How would you react to that? 

A: First of all, I am Italian, I come from a country that used to have, what we call the competitive devaluation back in the 1980’s and early 1990’s. And sometimes I feel from what I saw in Italy is this is a short-term fix. You think you can do something. Definitely, you help exports, but you import all sorts of problems that will take longer to develop. One of the major things that is going on India at the moment is the deleveraging of the banking sector and some of the changes that the banking regulators and the RBI have put in place will create an opportunity for the banks to deleverage. 

I think a good positive sentiment, in that sense, overall in the country is important for that deleveraging process. You need foreign investors to help out in that process. And devaluing currency is something that foreign investors do not like. It is difficult to hedge and it creates all sorts of problems. Now, from 67 to the dollar, we are talking about 70 to the dollar, in the big scheme of things, it is okay. From 67 to the dollar, we are talking about a larger devaluation then, that could hurt some of the confidence from the foreign investors. And as you said, the Indian rupee has been one of the most stable and that has contributed to the foreign investors coming into India. 

Q: We have seen of course on government bonds, the limit allowed for foreign institutional investors (FII) is full, but there is space available in corporate credit. Do you see India receding a lot of FII debt fund? 

A: Corporate credit has been traditionally one of the areas where a lot of foreign banks have been looking at. It is something that they will develop further especially some of the new securitisation laws will help that and we need to look at it in the global context also, of the overall investment banking competition where some competitors are scaling back. So, it is an opportunity, but it will take longer to develop than people might expect.

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First Published on Sep 15, 2016 03:04 pm
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