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See earnings growth improve in ’16; like ITC: Jeff Chowdhry

It would be incorrect to continue to classify emerging markets as one asset class, says Jeff Chowdhry, senior emerging market fund manager, LGM. “One needs to be very selective as far as investing into emerging markets is concerned – which one you are investing in. In that context, India is very well-positioned among EMs,” he explains.

On the recent US Federal Reserve action, he believes the central bank is preparing the ground for an eventual rate hike. He refused to comment on when that might be. But says a rate hike will spur a sell off in the short term.

Coming back to India, Chowdhry says this year gains will not be of the same magnitude as last year. However, the good news is earnings will do better and macroeconomic environment is likely to improve further. He has a positive long-term outlook on India despite the near-term hiccups.

He expects the banking sector to do well in the medium term. He also likes the consumer sector and is positive on ITC ,  Bata and Emami . He continues to remain bullish on IT and pharma sectors.

Below is the verbatim transcript of Jeff Chowdhry’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: Post the FOMC meeting, we did see a bit of a sentiment bump up in global markets but then most of that came off. What is your own assessment of when the rate hike will come in and when we do get a rate hike, will it just be a sentiment impact or will it be a long-drawn sell-off?

A: To answer the second question first, I think it is fair to say that what the Fed is doing is preparing the ground here, and obviously they have got a very tight rope to walk making sure that it is well highlighted but at the same time at some point in the future, the Fed will have to increase interest rates, when that might happen, it is anyone’s guess. Some people are saying Q2, some people are saying Q3 frankly the simple reality is nobody knows and the reason why nobody knows is that like everyone else the Fed is basically looking at the data. So in terms of when it is going to happen, don’t know. Is this market likely to sell off when it happens? Yes, I think that in the short-term they probably will, no matter how much the Fed highlights it beforehand, when it happens, the markets will probably sell-off in the short-term.

Sonia: What about emerging markets (EM) particularly, will they be spared the blushes or are you expecting a sell-off in emerging markets as well?

A: I think so. If you look at EM as a whole, one has to be careful just treating them as one, I think what is going on in EMs now in my opinion – and I have been in this business for more than 25 years – it is probably the most separated I have seen. There is no way that you can think now about emerging markets as a single class. Let me just summarise – Russia is a basket case, Brazil is a basket case and Mexico, Turkey and one or two other markets, South Africa are struggling. On the other hand India is doing pretty well, Philippines is doing very well, Indonesia is doing pretty well, North Asia is doing not too bad, so I can go on and on. So I think one has to be very selective about which emerging markets you invest in and in that context, India is pretty well positioned and some of the other markets that I mentioned just now for long-term investors such as ourselves.

Stay tuned for more…

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