India overvalued; 50% chance of Dec Fed taper: AMP Cap

US markets are currently overbought and have a high chance of correction, says Shane Oliver of AMP Capital Investors.

Also read: Will strong US jobs data hasten the taper?

Speaking to CNBC-TV18, Oliver says the worries of US Fed taper basically mean that the economy is strengthening which should be good for investor profits. Additionally, he says there is a 50 percent chance that the taper occurs in December itself.
On emerging markets (EMs), Oliver advises a case-by-case approach as China is relatively cheap whereas India, he believes, is still expensive. Below is the edited transcript of Oliver's interview to CNBC-TV18. Q: We have seen two or three days of weakness across the US market. How would you approach global equities now?
A: We had great time year-to-date in global markets, including US in particular. Probably the market has become a bit overbought. Some technical indicators are not working and its affect could be in sentiment, hence, there is risk of a correction.
The December month is particularly reasonably strong so it’s a seasonally strong time of year for the share markets and the broader economic picture is one of economic recoveries. So, my feeling is that it may take a bit off the table but the broad picture in share market is likely to remain up.
The worry of the Fed tapering means the US economy is stronger, which ultimately should be good for profits. So, I am not too concerned that though investors should be cautious in the short-term. Q: How are you looking at the immediate picture? Is there a tactical problem for the market, tactical sell? Do you expect the non-farm payroll numbers to be good, is there a possibility of taper in December?
A: There is a possibility, in fact its 50-50 as to whether it’s in December or early next year and there is lot of interest in payroll number this Friday, which is creating nervousness amongst investors in the run-up to that. So, in the short-term if there is a risk that this correction goes a bit further but against that if the Fed does taper, as I said its 50-50 that might prove to be a buying opportunity because by the time it occurs, it would have been factored in investor expectations. Q: A word on emerging markets (EMs) like India. How would you approach because there is a snowball effect of caution that we are seeing in markets like ours?
A: EM equities have been underperforming for a while now and that reflects the combination of slow economic growth. Some countries like India have more of an inflation problem, monetary tightening. So, the underperformance has been going on and against that though EMs have become a lot cheaper. There is a bit of value in EMs which perhaps doesn’t exist in US but the broader picture should be taken case by case. At the moment, China’s share market is quite cheap and some of the markets in north Asia look quite attractive, other markets in EMs including India are still relatively expensive.