Manish Singh of Crossbridge Capital said he expected one rate hike by the Fed this year and three next year.
The dovish view by the US Federal Reserve for now spells good news for equity markets, but the trajectory of interest rates will be more important than the timeline for rate hikes, Manish Singh, Chief Strategist and Head of Investments, Crossbridge Capital, told CNBC-TV18.
Singh said he expects one rate hike by the Fed this year, and three next year. He said the recent rally in Indian shares was a short term move and not indicative of a trend.
Below is the edited transcript of Manish Singh's interview with Ekta Batra and Reema Tendulkar on CNBC-TV18.
Ekta: I wanted to know whether you have looked at the Shanghai markets today, it is down 3 percent currently and now it has notched up to losses of close to 7 percent on a week-to-date basis. What is troubling Shanghai and is it good for India?
A: You are right; we are seeing a lot of news flow from China this morning again. There have been many reports that they are going to do further round of easing. It could be driven by that as well. My primary belief is that US and FOMC has been a big factor for emerging market and the dovish Fed is good for the market. So, you are going to see some relief in the market.
Reema: When do you pencil the first rate hike and thereafter Janet Yellen’s commentary is that the rate hikes will be gradual. So, according to you what is the house call and how many rate hikes will we see in 2015 as well as in 2016?
A: Two things came out like very strongly in yesterdays press conference. One was clearly that people should not obsess about timing but the path of the rate rise and that has been defined by Janet Yellen as gradual. She gave a long winded answer as to why it will be gradual.
Secondly, in the last FOMC statement held in March dot plot, we had only 3 participants expecting one rate hike. Now we have 7 participants expecting one rate hike. I strongly believe one of those dot belongs to Janet Yellen as well. So, my view is that only one rate hike is going to be this year.
I still expect it to be September, though it might be after that. However, I expect one rate hike this year and three rate hikes next year. You also saw the Fed reduce the growth expectation for this year. So, all this is dovish in the sense that Fed is not going to run away and raise rates unless the inflation is out of control which is not the scenario at this point.
Ekta: The other cue that the markets are watching keenly is what happens with Greece. What is your expectation from Euro Group meet today and overall when can we expect may be something decisive on Greece?
A: The Euro group meeting today is completely inconsequential for the fact that Yanis Varoufakis has said that they won’t be any deal. They don’t expect to present any new document or any new plan. We have the EU leaders meeting on June 25th which I think is more consequensive because there are signs that you are seeing money leaving Greece at an accelerated space. This means that there could be need for a capital control may be as early as this weekend. If you have a capital controlled announced then things could move very quickly.
My view is that I don’t see anything today but by the weekend. The ultimate deadline for all this is end of June because that is when the current programs run out. Then Greece has to make big payments to European Central Bank (ECB) and International Monetary Fund (IMF). So, for me the ultimate deadline is June 30th.
Reema: You look at India very closely, what have you made of this five days winning streak wherein we have outperformed the Hang Seng market by nearly 5 percent, The Korean markets by nearly 3-4 percent and Shanghai by even more. Is this going to sustain, this outperformance by the Indian market in the near-term and just a 100-200 points away seen as an important resistances for the market does this up move while it has legs to move too much higher levels?
A: My short answer is no. It is just a short-term movement as we discussed last time as well you will have some false rallies and bit sell-off. But the levels are very comfortable in the sense that I had some of my limit orders come in once the market went down. But I do not expect big gains from the Indian market unless we see real improvements in the policy terms.
It does not mean that you short the market and sell. One should continue to hold and pick some good stocks when the market falls, that is exactly what I am doing. I don’t expect a sustained sell-off but I do not expect a rally very shortly.
However, I would not take that as a big relief in the sense that there will be a rate hike later this year. So, the respective countries have to do their own bit to keep their market going. However, in the short run it should be seen as a relief and a positive news.The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .