In an interview to CNBC-TV18, discussing the Indian markets, Richard Gibbs, Global Head of Macquarie Securities, said they have been buying Indian equities recently, but feels monsoon would remain a problem for the markets.
Though he does not see rate cuts from RBI anytime soon, he has “big expectations” on structural reforms from the Narendra Modi government.
Gibbs feels things would be tough on deficit front for India in the short-term.
Below is the transcript of Richard Gibbs\\' interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: There has been a decent rally in the Asian market as well in the developed markets. Do equities go on this way; are you expecting the S&P 500 to quickly take its all time highs?A: I think we are back into growth game and the risk-on situation although we are in a period of trading wave; we get into risk-on and risk-off but the strong wave from United States with the sentiment improving. So that suggests that things are getting right back on track and having come back out of North America last week, I think that is definitely the case across the country.
Latha: A right back on track economy should logically mean the central bank shouldn’t be too generous. What are you expecting to hear from Yellen at Jackson Hole? Can there be some obstructions, slowdowns to the current equity rally?
A: We are going to hear about the labour market because the title at Jackson Hole is Revaluating Labour Market Dynamics. So, it will evolve around that and of course the productive growth for the US economy and elsewhere taken against this backdrop of the decline we have seen in labour force participation in the developed economies lead by the United States. I think we will see talk about that, there will be talk about skills shortages and wage inflation in the US but it’s the time when the Fed is going to successfully complete its QE tapering operation in the next month or so. Latha: What are you working with in terms of US bond yields - December 2014, June 2015?A: We certainly happen to few weeks ago working with a situation where we thought we would be looking at 2-3.25 percent for the 10-year treasury bond yields and we thought that as we have held since the beginning of this year the 3 percent yield was the tolerance point for the US economy and the US recovery, needless to say that dramatically under short backs in the US and other jurisdiction. So, I think the Fed’s focus now is shifted away from trying to control the bond yields and treasury yields now to the short-term and money market management, liquidity management at the short end and an attempt to be back on normalisation of this policy interest rates very shortly.
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