In an interview to CNBC-TV18, Shane Oliver, Head Investment Strategy and Chief Economist of AMP Capital Investors shares his views on the global markets and his expectations going ahead.
Below is verbatim transcript of the interview:
Q: All markets are now looking at the mother market, the US markets. What is your sense, is that big growth scare from China, from Germany and from the IMF, all pretty discounted?
A: I think it is largely discounted. The fall has been quite vicious and it took the US share market at an intraday low point, almost down 10 percent and in other markets we have seen deeper corrections than in Europe and Japan.
We have seen quite a good correction there and a lot of bad news has already been factored in. It is too early to decide that we have seen the precise low but we are going to see a good rally at the year-end as seasonal strength starts kicking in and the US economy is still strong. So we have seen the worst of it and the bull market is likely to resume.
Q: The worst of it is a consolation but the correction, can it go back to the old highs?
A: I probably can, it might take a while to get there. Investors after the events of last few weeks will be a bit more wary about things and therefore, they probably won’t rush in straightaway. But by the same token, with US profits likely to be up 10 percent or so in the quarter just passed, profit growth is looking like it is going to be reasonable going forward that suggests that sometime in next six months mostly the market is back to the previous highs.
Q: That is an optimistic view. You track the India markets very closely. We have seen a slew of reforms come through in the last two-three days, what have you made of that and what would your opinion be on Indian equities now?
A: Indian equities are one of the strongest this year and year-to-date (YTD) the Sensex is up, we are looking at 24-25 percent and so, it is one of the outperformers. The valuations are still albeit on the high side, the forward P/E on Indian shares is around 14.7 times. It is certainly not a cheap market.
Inflation does tend to be cooling down, the central bank, the Reserve Bank of India (RBI) is finished tightening interest rates, the next step will be the rate cuts and on top of that the structural backdrop with the new government having successful results in various state elections adds to the reform agenda in the India.
In terms of emerging countries, it is not a bad place to be even though its valuations are relatively high. It is not a bad place to be from a long-term perspective. So after having a bit of a pullback in the last few weeks along with global markets, the Indian share market will probably also start to head higher.
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