Indian market to rally until tapering begins: Finaport

With all around consensus that Fed is likely to begin tapering in March 2014, Asian markets will continue to perform well says, Hans Goetti, Chief Investment Officer, Finaport.

According to him European markets are showing signs of recovery and have cheap valuations. So, he is bullish both on Asian as well as European equities. India, he says will continue to rally on back of extended quantitative easing but once the tapering starts Indian market is likely to see correction, he adds. Also read: Mkt driven by fundamentals not just liquidity: Axis Direct Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is your call now? When do you think Fed is going to start tapering? A: The consensus calls for tapering to start in March but we cannot say this is a hard number or anything - it will be data dependent. I think the FOMC meeting shows that they are looking to taper but they don’t have enough data yet to ascertain that the economy is strong enough or unemployment has fallen far enough. So I would think tapering in March is probably a good bet right now. Q: Within equities what would you prefer developed markets, emerging markets, within emerging markets and in Asian markets, what part of Asia would you prefer? A: Asian markets will continue to do well. They have been doing well for the last two months essentially, and on the valuation basis, that should continue. However, at the same time, if you look at the US market we are at all time highs in the Russell 2000, into Dow, in the S&P 500 and that market will continue to do as well. We like Europe also on the valuation basis because we see some improvement in the underlying economies and still people are being slightly underinvested there. We also like Japan because Japan is in at a different stage in the credit cycle than everybody else and Abenomics seems to be gaining traction. We see the first signs of inflation, which is something they have wanted. There is also some hope that finally something will be done on structural reforms. So Japan is very high on our list as well. Q: Where would India figure on the list considering that even the Indian equity markets are playing with all time highs? A: That is correct. India is very sensitive to what is happening at the central bank level and what global central banks are doing. After the tapering talk of course all the markets with high current account deficit like the India, Indonesia collapsed but they rebounded again. I would think as long as QE continues, India will enjoy while it lasts but if tapering starts and of course you could have a pretty severe correction but until that happens, we don’t see it.