Neutral on India; global growth on track: UBS

However, he is neutral on India. He believes it is attractive from a long-term perspective and no longer considers India to be a high risk market. He says given the reform story under the new government, rupee holding up well, the country looks interesting. However, he does not think India will be an outperformer.

Below is the verbatim transcript of Geoffrey Dennis' interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: Give us your estimate of global growth. There is this huge global growth scare but with yesterday’s jobless numbers coming in lower and the industrial output number coming better, is there a chance that the growth fears are overdone?

A: Yes we do think the markets have probably gone too far in their concern about global growth. Our own particular view here is that the global growth story is very much on track and we think that some of the big part of the worry is that markets have been focusing on is not so much growth but also the whole deflation and disinflation story. So I think the fact that European inflation has been falling and there is just a general concern about deflation if you like around the world economy, low inflation we think that has got something to do with it as much as a real panic about global growth. Global growth is under pressure certainly because of Europe. The oil price falling over USD 30 a barrel is also probably telling us something about the global economy that there is a demand for oil. But we entirely agree with you that the US economy is going to continue to grow between 3 percent and 3.5 percent in the short-term and therefore eventually we imagine that the global growth story, the scare of global growth will probably subside.

Sonia: So you think the sell-off in the US markets or even some EMs is overdone?

A: I think so from a fundamental standpoint we feel they have corrected enough. In terms of emerging markets themselves, we don't know as of today intraday we are down around 12 percent from the high and that is a pretty significant correction of course and we have done some work on the scale of the correction. We have had eight corrections in emerging markets equities since this bull market began at the end of 2008 and they have averaged about 17 percent. So this correction is not yet up to the average that we have seen in the last 6 years or so and so you could argue it could go a little further. Also, I think given how turbulent yesterday was in particular with the big huge rally in US bonds and for time equity markets worldwide being weak, I think it is going to take some time, a few days for markets to find that level and to stabilise a bit. So we might go a bit lower in the short-term. But from a fundamental point of view yes, we think this sell-off is getting overdone without any question.

Latha: Then are you buying equities now? If yes, what are you buying?

A: Yes, we are. We are just not sure how quickly it will all work but we certainly think it makes sense to be looking for opportunities to buy. If I could just say two other things, it is worth pointing out that in this sell off we have had very little discussion of the emerging market growth story. So earlier in September for sure, there were some concerns of the margin about China. But they seem to have subsided. China continues to slow gently as opposed to slowing sharply and also we believe in October when emerging markets have outperformed developed markets particularly the US, the dollar has weakened again, it has kind of helped. So I think there are some things that are supporting emerging markets. The growth story is not getting any worse, it is not great, it is 4 percent growth this year and it is not getting any worse right now. It is very much a developing market event I think therefore we are looking to selectively buy and are overweight some currently Korea, Taiwan in Latin America, Mexico, Columbia, Peru and we have also added some risk to our portfolio about 10 days ago by adding to Turkey and Turkey is a risky market but it has held up very well in this sell off. We think Turkey is particularly interesting right now and it is somewhere that investors should be adding money to.

Sonia: What about India? Let me come to India. The Nifty has lost what 7-8 percent since its highs. At what point does India become a buy for you?

A: It is attractive for the long-term at this level. We are neutral in India. We don\\'t consider it to be a high risk market anymore because of the adjustment to the current account deficit (CAD) and of course you have got all the excitement which we think is appropriate given the reform story under the new government. And India of course being down 5-7 percent with the currency holding up well in a period of time in September when currencies didn’t do well in EM until we saw a weaker dollar happening this month. So it has outperformed in the sell-off, which I think is what you would expect given the fundamental story there. So, I think from a fundamental point of view, India does look interesting. We don't particularly think it would be an outperformer necessarily on a rebound but our view has been for sometime that fundamentally, the growth will come back in our view, the corporate sector is performing relatively well compared to a lot of other emerging markets corporate sectors and I think what puts us off about being aggressively positive in India is the valuation story. As those valuations do come in, India does look interesting and I fully expect money to come back to India when we start to see these markets finally settling down.

Latha: The other big global event is the way Fed governors are now talking. Stanley Fischer and other Fed governors are talking about a strong dollar hurting US growth and pushing off the Fed's rate decision timetable? Do you think the Fed's rate decision is probably off by over a year? What is the time you all are looking at?

A: We haven't formally changed the Fed code which is middle of 2015 but I think the combination of the dollar strength even if the dollar is a little weak slightly, it has gone up sharply over the last few months and the fact that you do have weaker global growth that is true particularly of course with respect to Europe and the fact that Fed has made clear comments that they understand what is going on as of course you would expect them to do so and I think certainly the risk is that the first Fed rate is hike is going to get pushed back into the future and right now with the perhaps the major global issue being the risk of deflation and the softish global growth despite the US is doing well, I think we are long away from the rate hike at this point. Therefore, I think the risk to our focus is definitely later, a later rate rise. I think there will be some market discussion frankly of another round of quantitative easing (QE) right now. I think it is unlikely to get that but I think if this market turmoil continues, there will be a lot of debate about whether you get some more QE.