Indian mkt to rally post Fed hike, see stable rupee: Ridham

Ridham Desai, MD & Head of India Research, Morgan Stanley is of the view that Indian shares will gain on Thursday morning if US Federal Reserve hikes rates, adding that the rupee too will be stable. According to him India is much better placed in the world with respect to leverage. From Indian perspective there are three things, one the RBI had double rate cut at end of Sep and it is first time in the history of India since we opened our doors to the foreign capital flows, that it has moved against the prospective move of Fed and this underpins strong macro stability that India has achieved over the past couple of years on back of lower inflation and therefore higher saving and lower current account deficit. So, the Indian Central Bank is more confident of dealing with Fed event.In fact, India is more worried about China than Fed hike, says Desai to CNBC-TV18's Menaka Doshi at AIBI SUMMIT 2015.Two, the US Fed decision is not that critical because it has already been priced-in by markets but marks a shift with respect to policy in the US, which in turn will mark a shift in pricing of interest rate asset class across the world, says Desai.Three, according to him  the world is very different from what it was 20-30 years -- it is aging, has a lot of debt and has got a deflation problem and in context of that Fed rate hike could produce some surprises.
He says, the corporate leverage is a lot higher than it was in 2008, spreads have widened in the last 2-3 weeks, the credit markets are nervous about Fed move and in fact, financial conditions in the US have tightened, which has caused US interest rates to actually go up even before the Fed hike. Emerging market corporations have lot of US dollar debt, and so will have implications on them as well. Meanwhile, Eurozone is easing and that could lead to some uncertainty in the currency markets and there will be cross currency headwinds for corporates.

For the entire discussion, watch video