Jeff Chowdhry, head of Emerging Equities, F&C Investments believes the European markets are better placed than the US markets which seem to be overvalued. He is bullish on emerging markets and expects good returns from them over the next three-five years.
In an interview to CNBC-TV18, Chowdhry says the rupee is currently undervalued. According to him, the improving current account deficit is positive for India though fiscal deficit and inflation still plague the country.
Chowdhry believes India’s current account deficit will continue to improve in 2014. He, however, does not see a big pick-up in growth. He is not overweight on Indian equities before the polls and is unlikely to participate in a pre-election rally.
Also Read: Emerging markets now offer 'fantastic value'
Below is Jeff Chowdhry's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: Developed markets (DMs) like the US gave us returns of almost 30 percent last year, do you see US markets remaining the flavour of the season in 2014 as well?
A: In the short-term, in the next three-six months, the answer is yes. In the longer-term, on a one-two year basis, I am concerned about valuations in some markets, not all markets in the developed world. Europe is still reasonably attractive at this point in time. This is because it didn’t go up as much as the US but certainly pockets of the US equity market strike me as pretty overvalued.
It takes me back to 1990 when we had the technology boom as the market was fairly overvalued at the end of 1999 and technology stocks continue to do well for three months and then after they collapsed. So, we are in the final stages of a boom that could end quite horribly for certain areas of the market in the US.
Latha: Do you think India’s current account deficit (CAD) has been reined in for good at least for the medium-term, what are your macro worries now?
A: Earlier, I had felt the rupee was undervalued and that would lead to an improvement in competitiveness for India. That is what has happened now as CAD has improved recently. The improvement in CAD will continue during the course of 2014 because the rupee is fundamentally undervalued at this point in time.
The other issue, which is related to inflation and fiscal deficit is more difficult. Inflation continues to be a problem and even though the government has made some efforts to rein in the fiscal deficit, inflation and fiscal deficit are just too high at this point in time. Unless we have some sort of tougher measures, that is going to be a continuous problem for the Indian economy going forward.
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