The global environment is likely to get choppy in the coming months, and investors should not get exuberant because of the stimulus package announced by the ECB, says Saurabh Mukherjea of Ambit Capital.
The Greek elections will be one of the closely watched events, and Mukherjea says there is a good chance of an anti-Euro party coming to power.
But more important to market sentiment will be the events unfolding in China in the coming months, he said in an interview to CNBC-TV18.
Mukherjea sees the slowdown in China could triggering a devaluation of its currency yuan and even leading to it getting ‘unhooked’ from the dollar peg.
A devaluation in China could have spillover effects and lead to volatility in the currency markets, which in turn will have repercussions for the stock markets as well.
China’s Purchasing Manager Index (PMI) for manufacturing falling below 50 will be a sign of trouble not just for China, but also for the global economy, he says.
On India, Mukherjea says he expects the Sensex to touch 30,000 by March this year and 36,000 by March next year.
He is expecting a constructive session of Budget, and expects the Coal Bill and Insurance FDI Bill to be passed in the Budget session beginning February 23.
He sees the Good and Services Tax and Land Acquisition Bills facing opposition in the Parliament.
Mukherjea is bullish on auto, industrials and banks/financial services, and is bearish on metal stocks.
Mukherjea does not see many reforms being introduced for state-owned banks, and prefers private sector banks over public sector ones.
Below is the transcript of Saurabh Mukherjea’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: 29,500 is almost here and the Nifty at 8,850, what do you think, there is no looking back for the moment?
A: We go through these phases of global euphoria and global bearishness so often that I have tried to sort of immunise myself somewhat. However, focusing on practical matters this is major stimulus, this is almost comparable to what the Americans did in the first year, year and a half post Lehman. This is bound to have beneficial effect on emerging market equity flows for a while; I don’t think it just one or two day affair.
This will also arrest the decline in commodity prices and so far if that is the case it could lead to some of the euphoria around oil easing up, abating in our country. However, it is worth keeping couple of things in mind, the HSBC PMI for China is below 50, the news from China continues to get worse by the passing month and that will weigh down on global commodities sooner or later.
The second thing is the Greek elections on Sunday. I am not a political expert on Greek or European politics but the news from Greece seems to be that there is a good chance of an anti-European party coming to power and that will then lead to the usual resumption of Grexit next week. So, my hunch is the ECB knew that there is some bad news in the pipeline and they are trying to preempt that with powerful quantitative easing (QE). We are celebrating that today but perhaps it makes sense not to be too euphoric about it. There could be some global negatives coming up over the next two to three weeks.