Manish Gunwani, senior fund manager at ICICI Prudential AMC believes dollar trajectory will be the key variable in the short-term
The Indian market is fairly resilient at current level, with good support coming in from domestic investors, says Manish Gunwani, senior fund manager at ICICI Prudential AMC. He expects domestic flows to continue to remain strong.
However, he believes dollar trajectory will be the key variable in the short-term. "We are entering a very macro heavy phase - ECB, US Federal Reserve action, etc. But it may just be true that whenever the US dollar does well, EM countries don't perform that well," he told CNBC-TV18. He says a risk-off sentiment is triggered when the dollar index crosses 100.
Going ahead, he does not expect earnings growth to rebound sharply.
Gunwani is positive on the auto sector and believes consumer demand revival will reflect in the auto sector.
Below is the verbatim transcript of Manish Gunwani's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: What is the general view on public sector banks itself? Moody's and Fitch at least have removed their negative and put a positive outlook, is it buy time or were you already buying in the first place?
A: We have had a certain exposure to public sector undertaking (PSU) banks. Since India's macro improved, quite clearly they are big beneficiary of any improvement in the macro story. However, there is a optionality building there also from a micro story where the government as you have seen just now wants to do certain reform and to make them competitive versus the private sector banks. Now there is a lot of work to do on that because the gap is very high whether you talk of HR, technology, non-performing assets (NPAs) so there is enormous amount of road to travel on that path in a sense. However, I do think that given the valuations and the fact that you are very comfortable with India's macro right now, definitely it merits a place in a portfolio.
Sonia: Market has not given you any cheer on the whole this year, it is down about 4 percent but do you expect good cheer in the last part of the year?
A: It is always very difficult to time the market for two-three weeks but I do think that the key variable in the short-term is going to be the trajectory of the dollar because it is a very macro heavy period we are entering. You have European Central Bank (ECB), Organization of the Petroleum Exporting Countries (OPEC), you have Fed. So it seems that whenever dollar does well, the emerging markets tend to suffer a bit and we have to see how it pans out.
December mid Fed meeting is in a sense been something where a lot of market experts have been focused on. Now while at one level, you think whatever has been discussed so much would probably be a non-event but I do think that giving the amount of debt that there is in this world, given the fact that most of the trend and capital flows are linked to the dollar, I think we will have to see how the dollar pans out. The DXY has already crossed 100 and in a sense that generates a lot of risk off sentiment globally.
Sonia: So you expect to see lower levels for our markets? Do you think we could retest those 7,500 lows that we touched recently?
A: In a macro heavy period, you never know how things will pan out but I do think that the markets are resilient at these levels broadly because on a valuation basis, on a macro basis and then the domestic investors flows seem quite resilient at this point of time. So we are not looking either for a very big upside in the short-term neither are we looking for a very sharp downside in the near-term right now.
More to follow...