India a beneficiary of flows into emerging markets: Rabobank

On account of problems pertaining to developed markets, emerging markets look favourable from an investing point of view, said Michael Every of Rabobank. Speaking to CNBC-TV18, he said: "There are flows going into EMs now and India is a beneficiary of that." Markets world over are in a 'precarious' position right now, he added. Though there is some rally in the equity markets, he is not too confident about the current rally. Market sentiment indicates expectation of a hike in the interest rate by the US Fed, he said.Below is the transcript of Michael Every’s interview to Latha Venkatesh and Ekta Batra on CNBC-TV18.Ekta: First blank check question. What is your expectation from the Fed this week?A: They are signposted that they are still minded towards raising interest rates gradually before the end of the year while continuing to flag global risks bearing in mind that more and more cynics although you might say realists reckon that the Fed do not even look at economic data anymore. They just look at where the Standard and Poor (S&P) is trading. There certainly appears to be room for them to raise rates. Latha: So, do you expect any bit of hawkish noise at all and how might the markets react to it?A: We are already seeing the longer bond yields starting to edge up again. We are very much of the lows that we saw a while back and we are starting to see more and more market sentiment towards the fact that we could see a hike. It really depends on whether the rhetoric seems to suggest one and then done for a very long period of time or if they still seem to believe that somehow against the global backdrop that we have got and even the US backdrop that we have got in the run up to the presidential election that the US can actually sustain significantly higher interest rates. So, we will be parsing the wording very carefully. Markets are still very delicately poised, let us put it like that.Latha: Delicate you say when the S&P is touching new highs practically everyday. What about the Bank of Japan? What are you expecting?A: They are in a very different position of course. They really need to do something fast, clearly because when you look at how precarious the state of their particular economy is and how they are sinking back into deflation again, their credibility is very much on the line. They could not do anything recently and the market has punished them severely in terms of how much stronger the yen got and then of course, we have seen this sudden swing back of around 6 percent already now, clearly because there are expectations that they will be forced to do something radical. If they disappoint, obviously, we are going to see yen surging and that is going to be a negative for equities in most places. But if they do not disappoint and if we continue to see something incredibly ludacris, how you can get more ludicrous than what they are already doing is very hard to discuss in too much detail, naturally we will see a weaker yen.Latha: You do not have a very good opinion of central banks.A: No, I do not, none whatsoever. I think the Bank of Japan will be forced to do something and the equity market will be juiced by that for a while, but no rational economy would ever want to end up in the position that Japan is currently in.Ekta: So, how is India placed in this entire scheme of things because we have bounced back since the Brexit lows but so have a lot of other emerging markets such as Brazil. So, is it just an emerging market favourable trade that is going on globally or is there something which is making India stand out?A: At the moment, it seems to be that the problems are focused more on the developed markets. So, that is what the market seems to think and less than emerging markets that we have seen money going in. As I said a few minutes ago, I do think that everything is extremely precarious however. We do not have a good global growth backdrop either in emerging markets or in developed markets. And just because everyone is suddenly sloshing funds from one into the other does not mean that either of them actually look very good independently. It would take very much of a market scare to suddenly see everyone running for the exits all at once. So, yes, now maybe we can squeeze a little bit higher, but really I do not have a great deal of confidence in this rally to put it mildly.