Manish Singh of Crossbridge Capital FIIs are defiintely taking a closer interest in emerging markets becasue of lack of growth in developed markets.
Foreign Institutional Investors (FIIs) in general are focused on the reform agenda that would come into place immaterial of whichever government is elected says Manish Singh of Crossbridge Capital.
He further adds, FIIs are defiintely taking a closer interest in emerging markets becasue of lack of growth in developed markets."Emerging market as a whole has reaped the benefit of low lying fruit. For anything greater to happen more structural reform has to take place," says Singh.
Tapering by Fed will start from Q1 of next year and not happen in December. "Tapering is on track but not tightening." adds Singh.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: How are bankers like you approaching the two major events in the next two days itself - the non-farm payroll numbers and the Sunday election results? Does this have the potential to change investor mood rather drastically towards India?
A: I would say that for non-farm payroll number the expectation is at 180,000. Unless you have a number which comes at 130,000 or 230,000, i.e. a beat of 50,000 on either side it is not going to move the needle much. Tapering is on track. Tapering is not tightening. It is something that market clearly understands now and it is so much not as bad news as good news. If the numbers are worse then people keep buying on because they expect the Fed to keep supporting.
I am in the camp that tapering is not going to happen in December, it is more for Q1 next year.
Coming back to your other questions about how the elections are going to impact investor sentiment - emerging market as a whole has reaped the benefit of low lying fruit. For anything greater to happen more structural reform has to take place. So therefore the elections, not just in India, but other elections coming up in different markets become important.
From a foreign investor point of view I would say that currency becomes an important play. I personally see USD-INR in a range of 63-64/USD which is not very far from here. Clearly market has a far positive view on India and the reform agenda that may come up. Obviously I am not going to take sides on elections here, but just on what we expect in the market.
Q: How the market is currently positioned? Just in case we get an election verdict which is in line with market expectations which means more power to BJP - then do you think the rally will continue because markets have been resilient? In case there is a disappointment do you think there is a case for markets to sell-off and if yes how much lower could the Nifty go?
A: In either way I do expect that you will have some sort of surprising trade on Monday. Obviously given the sentiments and the newsflow leading into this election if it is in line with what reform that people are expecting from the new government coming in or at least it puts the reform agenda in the poll position then clearly you will see a big rise in the market.
I would not say a big rise, because markets seems fairly priced if you are talking only about India, but from currency flow and portfolio flow point of view you might see a big flow coming in.
Q: For Indian citizens themselves in the last 15 years we have seen all colours of government and economy has gone through all these without too much of a hiccup, but now there is a lot of hope and lot of talk being built around who will come in after elections in May. Do you think the Foreign Institutional Investor (FII) lot will be terribly rattled if it is a third front or if it is a UPA formation?
A: If you look at the Indian economy current account had become a big issue. Measures coming from RBI have taken care of that but these are not structural measures these are measures which RBI has put in place. So one would expect the government to come up and put fiscal measures and structural reforms in place.
FIIs are definitely taking a closer interest in at emerging market as a whole given that there is lack of growth in the developed market. In Europe too there is a deflation problem, which we will probably come to know tomorrow when the European Central Bank (ECB) meets.
Therefore, you are seeing far more newsflow reports and research coming out. The expectation is clearly that reforms should go ahead. As I mentioned the low-lying fruit has been reaped so all the big growth from that has come through. If you remember, we had this chat last year around same time when I said that how the Indian government has done a 9 to 5 job and we are still stuck in 4.8 percent growth rate.
So, clearly as an FII you are looking at what reform agenda is coming into place. you look at the reforms that China is putting in place. They have been very methodical in what they have been doing. So everyone expects that India follows suit and we have that as well.