India's earnings growth poor; GST key for market: JPMorgan AMC

The sell-off in January 2016, prompted by a declining oil and a slowing China story, was overdone and this market volatility will continue in the near-term, says Ian Hui, Global Market Strategist, JPMorgan Asset Management Company.Speaking to CNBC-TV18, Hui says the Chinese situation wasn't as bad as the market made it out to be. However, the dovish tone set by European Central Bank (ECB) in its move to provide more stimulus by March has proved to be positive for the equity markets, particularly Europe. He prefers developed markets — Europe, Japan and US — over emerging markets. Meanwhile, Hui believes India's earnings growth disappointed significantly and expects further downside in the Indian market if earnings continue to disappoint. He, however, is of the view that Goods and Services Tax (GST) will be the key trigger for the Indian market on policy front.Below is the verbatim transcript of Ian Hui's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: The last two weeks, since the start of the year must have been very trying for fund managers like you. What is the sense you are getting now. Have we at least put a near term bottom to risk assets?A: Obviously a pretty bad start for the year, quite a huge number of drops seen in markets across the world. I do think that the selloff at the start of this year was overdone. There was too much panic in the market although what was happening with oil, what is happening with China. I do think this is a near term bottom at least we might continue to see some volatility, we might see issues in China and other markets still continue in the future but I do think it is overdone. Most of the macroeconomic numbers that have been out still do indicate a slowdown in China but not as bad as the market reacted. Sonia: What is the next big global trigger that you would watch and worry about?A: Probably still keeping an eye on what the central banks are doing. Obviously yesterday the European Central Bank (ECB) announcement, now looks like there is more easing to come in Europe, very dovish tone there and that is going to be quite positive for the European markets. We are going to keep an eye on what the Federal Reserve does, of course any further issues or comments on how they see the rate hikes going forward. However, the market is now looking at probably one or two rate hikes this year as priced in. Therefore, keep an eye on what the Fed says and how they see things and of course how the Chinese government reacts going forward any further intervention they will make into the markets, any further action that they would do to ease monetary policy etc, will also be important to see how markets react to how they will go.Sonia: You spoke about a couple of negatives for the markets. One is the slowdown in growth, the slowdown in earnings, the policy deadlock and lack of government reforms. How much of that is priced in because our market has already fallen 10 percent this year. Do you expect more downside?A: I think most of it is priced in. I don't expect more downside if the earnings continue to disappoint. As I mentioned before I do think it is at a cyclical downturn, so I do expect it to improve in the future. On the government policy, if the GST does get passed going into the next government session, I think that will be a pretty big positive for the market. It will show that the government is still able to work things through and try and push forward their reform plans.