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KR Bharat of Advent Advisors and Manishi Raychaudhuri of BNP Paribas have divergent views on how the Indian market is likely to fare in 2014. Raychaudhuri is positive in his outlook on emerging markets in general, India included.
"I would think that Asian and emerging market equities are likely to do slightly better in 2014, because the tail risks are clearly absent. They have declined over the last 1 to 1.5 years," Raychaudhuri said in a discussion on CNBC TV18.
Bharat's take is that much of the recent upswing in Indian equities was purely liquidity driven, and as the bigger economies recover, investor focus will shift there.
"The focus is gradually going to shift to the larger markets from emerging markets. I don't think emerging markets are going to remain the flavour perhaps of 2014," he says.
"If serious investment has to come into India as opposed to hot money, it will be determined by policy announcements and implementation on the ground," says Bharat.
Also read: India's GDP likely grew 4.5% in Q2: Dun Bradstreet
Below are the excerpts of their interview on CNBC TV18
Q: This week was directionless. We were reacting purely to a lot of ambiguous cues that we got from across the globe. Do you think that this could be just a bull market correction and are you still hopeful about the markets getting to those all time highs?
Raychaudhuri: The market has entered a consolidation phase and this phase is likely to continue for some more time. If you notice all across September and October, we had the market moving up almost 20 percent or so. And I think that was overdoing things a bit, because while the fundamentals had improved slightly authentic mens louboutin shoes we had the trade deficit coming down, the Current Account Deficit (CAD) coming down and even the first half of the earnings season was quite good, but I think it is slightly premature to have about 20 22 percent rally.
There were some political hopes also getting built in there, which were clearly premature given that elections are still about seven months away. So, we are seeing a kind of reaction to that. We must also remember all that we are seeing both the upward move in September October and the correction in November, are not isolated instances, these are louboutin very prive patent happening across the globe.
Global emerging market equities http://westchesterblackbar.com are behaving exactly the same way. They are correcting as we speak, so those correlations with global fund flows are possibly the real variable that deserves to be tracked. Having said that, I would think that Asian and emerging market equities are likely to do slightly better in 2014, because the tail risks are clearly absent. They have declined over last 1 to 1.5 years. We are also pretty certain that even if liquidity contraction or tapering starts in the US, it will be only after the government and the Federal Reserve are absolutely certain about the sustainability of a stronger growth trajectory and that is not such a bad outcome for equities.
I would not try to arrive at a conclusion about the very short term, but if one has a medium term outlook then 2014 in general would turn out to be better for Asian equities.
Q: Do you believe as well that this could be a consolidation phase and the market is pausing before its next move and if yes which way do you think the next move could come?
Bharat: I have a slightly different perspective on what is happening here. Like I have said in the past as well, the entire move as far as India is concerned is more liquidity driven than driven by fundamentals. Apart from slight improvement in the current account deficit situation, all the other macro economic indicators remain pretty much the same; inflation, growth, IIP etc.
However, I do agree with what was said about global funds flow. A lot of subtle changes are taking place there. For example if one looks at what is happening or what is going to happen in Japan, there is going to be a lot of easing that the Japanese are going to do before March 31 of next year and they have already announced this. A lot of analysts are now calling for maybe a 15 20 percent appreciation in the Nikkei. So, there is a lot of interest in Japan.
The US economy is doing better now though not as quickly as maybe michael kors handbags outlet the Fed would want, which is why the tapering decision has been delayed but nevertheless there is improvement there. So gradually, from an equities perspective, the focus is going to red bottom shoes cheap shift to the larger markets from emerging markets. I don't think emerging markets are going to remain the flavour perhaps of 2014.
If serious investment has to come into India as oppose to hot money and when I say hot money don't get me wrong, I am not talking about illegal money. I am talking about money that is driven by the abundance of liquidity rather than long term portfolio money. That has to be determined by policy announcements and implementation on the ground here in India.
The third factor again is election and a potential change in terms of government and therefore by definition economic policy.
So, if you take each one of these factors, the most significant Cheap Bengals Jerseys From China in replica christian louboutin ankle boots the short to medium term is going to be international flows. I am no expert in terms of when tapering is going to happen. There are so many views ranging from December to the first quarter of the next calendar year to maybe not until the last quarter of next calendar year. That is going to be significant and while we will manage much better on the exchange front, there will be a significant impact both in terms of bonds as well as equities if tapering actually starts, I am speaking about India.
So, therefore the view in terms of the short and medium term is that the markets are going to be extremely volatile with a distinct negative bias.
In the long term however, I am very positive and India is overdue for a reasonably long term sustained bull market move. But don't get me wrong I am not seeing that happen in the immediate future but I do think there is potential for that to happen maybe 9 12 months from now. When that happens it will be for a reasonable length of time and I can actually see 2 2.5 year bull market coming then.
However, the next few months are actually going to be volatile, they are going to be difficult and the bias is going to be on the negative.
Q: Do you think as we go into the last leg of this year outperformance of developed markets will continue?
Raychaudhuri: In the near term, yes. Clearly the developed economies are recovering faster than the emerging economies and as a consequence we have kind of a two speed world where the developed economies are recovering faster and as a consequence, the fund flows are also gravitating to these parts.
So even within Asia, we are trying to play the relatively developed part of Asia. In our Asian model portfolio we were overweight the North Asian segment likes of Korea, Taiwan and the Hong Kong China combination.
Another important data point is that if you look at corporate return on equities (ROE) over last 12 15 months the developed market ROEs have been significantly higher than the Asian or emerging market ROEs. This is actually not a very usual phenomenon. We are seeing this for the first time after almost about 8 10 years.
So it is not surprising michael kors factory outlet that the fund flows are gravitating towards the developed part, not only the economic recovery is stronger, but even the corporate fundamentals seem to be better. There could be some recovery in Asian ROEs as well in 2014 that is our forecast, but for serious reversal of the players into the emerging market it will clearly take sometime.
Nifty and Bank Nifty is making a bearish pattern. Prices are at the verge of the breakdown in Nifty where as Bank Nifty will confirm this pattern if prices breaks below the support. We will discuss the possible targets for these patterns if a breakdown occurs. CNX IT has closed near to its support. We have GOLD in christian louboutin so kate black METALS; which is making a possible bullish head shoulder. We will discuss the support and resistance louboutin shoes outlet online level for GOLD. Then we have AUTOMOBILE Sector. The sector is consolidating at the top and now giving a sign of breakdown. Stocks in focus include BPCL and BIOCON. For each of these stocks, we analyze their technical picture; identify trades with stop loss and targets. At the end we have EUR INR currency pair.

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