Nifty broke the psychological 8000 levels slipping to its lowest level in late afternoon trade amid fears of inadequate monsoon and interest rate hike by Fed. But Adrian Mowat of JP Morgan remains bullish on the market, unwilling to rule out India as an investment destination.
In an interview to CNBC-TV18, Mowat said he will buy India, particularly manufacturing and building material stocks if it corrects some more. While Mowat admits to “India looking pretty weak at the moment, he does not think local issues alone led to the correction.
He, however, believes the Reserve Bank could have gone for a more aggressive rate cut. He also voiced his concern over falling rural demand.
Below is the transcript of Adrian Mowat’s interview with Ekta Batra & Sumaira Abidi on CNBC-TV18.
Ekta: It is looking quite tough for the Indian market especially when you compare it to the likes of China. What is happening and are you worried?
A: We have seen general market weakness including H-shares, Hong Kong shares from April high. So generally emerging markets off about 6 percent and India is marginally underperforming that correction from recent highs. So I wouldn’t treat these two as India specific. I do get feedback from clients that they do not see near term drivers for the market and they were disappointed in the Reserve Bank of India (RBI) credit policy with just 25 bps move and suggestion that the RBI is on hold for the foreseeable future.
We do worry that central banks are setting policy in the headlight to the Fed rather than follow local conditions and with the Indian economic numbers relatively subdued and inflation modest. I think the economy could have done with more aggressive move by the central bank.
Sumaira: The last time we spoke to you, you said that even what we are seeing in India is perhaps just a routine correction, 15-20 percent corrections in emerging market is not something that would worry you. But, now that we have slipped below that 8,000 mark, technically, it could open up a lot more downside. Would that worry you?
A: 8,000 is a nice round number but we would agree when we look at the technical. India looks pretty weak as do many markets at this point. So, again, India is not on its own. So, I am looking at a market that is down about 10-11 percent from the March highs. Again, as you are highlighting, this is something that happens in emerging markets.
There might be further downsides, but when you start to look how and think about what is going to be happening in India as you move into 2016, you have got still the fastest growing economy that is a major economy. You are likely to get more traction in terms of fiscal spending. We have been looking at the heavy, medium commercial vehicle sales in India which sequentially are looking pretty good as our passenger vehicles. Anecdotally we are hearing pick ups in transaction volumes in the property sector. And Index of Industrial Production (IIP) numbers have been quite weak in India because of imports of steel which has suppressed domestic steel production and maybe the IIP numbers are giving an overly bearish story on the economy. So, if we get further weakness, I am a buyer in this market.