Manpreet Gill, Senior Investment Strategist, Standard Chartered continues to remain overweight on the Indian market. According to him, the drivers for market remain primarily domestic. India remains one of his preferred markets within the Asia pacific region.
Gill expects the US Federal Reserve to raise rates by mid-2015. He believes the US companies have reported strong up-trending earnings path.
In an interview to CNBC-TV18, Gill says Europe is at a risk if European Central Bank becomes more aggressive with rate cut.
Below is verbatim transcript of the interview:Q: What do you think the Fed could do in the coming meeting?
A: The coming meeting is going to be a function of how the data and global sentiment evolves but we do not see the Fed deviating dramatically from the trend.
The little dissonance with some members voting in favour of beginning the process of raising rates and some members arguing to hold back is disagreement that is been going on for some time now and it is a reflection of the economic data.
The fact is that it is not clear-cut; it hasn’t been for some time. It has been improving trend but whether sufficient to justify raising rates is the question that has not been 100 percent clear cut.
Fed is still likely to be on track and may begin raising rates somewhere around second quarter or middle of next year.
We recognise there is a rising risk of a small delay if this fall in sentiment and risk to growth continues but at the moment there is little to suggest that Fed would deviate dramatically from its trend.
Q: Are you likely to see further downgrades in global earnings per share (EPS) and earnings growths in US, Europe, China, everywhere. Are the commodities market telling us that the equity markets have overestimated the growth or not?
A: I cannot completely agree there. If you are looking at the US, the reality is that earnings growth has been on a strong trend and whatever signs and indications we have of the current earning season are still fairly strong.
It is important to recognise that there is a lot of negativity, sentiment is poor but it’s about recognising where specifically the risks are and in our view the risks are to growth from Europe most of all, not so much in the US.
Some of the market moves have been sharp which talk about treasury yields for example, at least the large part of the move can be attributed to the fact that yields went through a couple of significant technical levels.
I do not think it needs to be attributed to the negative growth data alone. There are number of positives out there as well.
Q: Only Europe or Europe, China and Japan are all in danger of lower and lower forecast?
A: Europe is most at risk. It is the data that does look very poor. It hinges on whether ECB does become more aggressive in the form of easing - that is the crux.
In China due to slowing growth there is definitely an incremental risk but to an extent that has been a gradual process and it has been flagged by policymakers not looking into necessarily stimulate growth back to extremely high levels.
Japan is coming off a very low base and we do think that they will need to pursue further easing – that’s the stand we had for sometime now and we are seeing more signs of BoJ that they are willing to do more if necessary.
Q: Are you buying Indian equities?
A: We are still overweight on India and it’s definitely one of our most preferred markets in Asia pacific. It is interesting because in India many of the drivers are much more domestic and in today environment that does make the outlook pretty interesting.
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