Tuesday, December 8, 2009

Credit Suisse says .............

Positive on India for next three years: Credit Suisse
Published on Tue, Dec 08, 2009 at 11:35 Updated at Tue, Dec 08, 2009 at 15:55 Source : CNBC-TV18

Robert Parker of Credit Suisse says market activity is low despite an uptrend. "We are staying out of markets for the time being and will stay on the sidelines till December-end."
On India, Parker says the upside in the Indian market is limited in the short-term. However, he remains positive on India with a three-year view.

According to him, foreign flows to India via exchange-traded funds (ETFs) may rise. "ETFs will lead to higher volatility," he added.
Here is a verbatim transcript of the exclusive interview with Robert Parker on CNBC-TV18. Also watch the accompanying video.

Q: Do you sense any kind of hesitation in global market participants or do you think we can still have a strong end to the year?

A: If you look at activity in markets despite the fact that we have still got reasonably strong equity markets over the last week or two we have recovered very strongly from the setback that the markets went through over the adverse news on Dubai, despite that uptrend in markets, activity levels are low and there is clear evidence that some investors, including ourselves, are actually standing back from the market somewhat. We are not exiting but we are taking lower risk, more defensive profile. Certainly our plan is to do that through most of December and January.

Q: Once this phase is done, what is your take on the critical first quarter of 2010?

A: The first point to make is that the last gross domestic product (GDP) numbers we had were significantly stronger than the consensus. I would add that I thought the consensus was too pessimistic. The positive is that GDP growth in the first half of next year should maintain this sort of level. Our house forecast for growth in India over next year is 7%. If we are wrong, we could see a number closer to 8%.
So my point is the macroeconomic background for the year as a whole will remain positive. The second positive is the probable of a very strong positive generation of corporate earnings growth in India in 2010 relative to 2009. My only concern is that in Q1 of 2010, we may go through a pause in global equity markets. Specifically to India, one area to watch, maybe the reaction of markets, which clearly the valuation levels are much less compelling than they were six-months ago but how the market might react to a tightening of interest rates.
One of the features of the first quarter of next year will be a number of countries including India and China, which are likely to raise interest rates albeit slowly but that is going to put a cap on the market in the first month or two of the year.

Q: Is that a big concern though to you, the valuations we are currently trading at?

A: It would be very nice to go back into the market at much lower levels and the first point to make is that we turned – as most of your viewers would know – very positive on the Indian market in March 2009. We have maintained that positive stance up until recently – I wouldn’t say we are negative – we are just being a little bit cautious in the short-term.
One of the factors obviously for that caution is that we are looking at valuation levels, which are not as high as they were in the previous bull market but certainly we have come a long way, fast. The positive on valuations is that those valuations should be supported by strong corporate earnings growth in 2010.

Q: So tactically then as 17,000 would you be a buyer or a seller right now?

A: The answer to that is that I would be a buyer if we have a reversal to 15,000-16,000. The upside in the short-term in the Indian market is now somewhat limited. What you will see at least over the next few months is a lot of investors like ourselves being little bit more cautious sitting on the sidelines, looking for re-entry points. The risk of being wrong is that the market continues to power ahead but for a number of the factors I mentioned, I do think the upside is limited in the short-term, although I must emphasize that taking a 2-3 year view, our approach to the Indian market remains in the medium-term very positive indeed.

Q: How would you gauge liquidity interest though right now? Is there a nature to it in that, is it mostly being driven by exchange-traded fund (ETF) money or are long only funds also looking at India?

A: One point to make in the asset management industry worldwide is the increasing popularity of ETFs. Increasingly, you are seeing not just retail investors but also institutional investors who let us say make a positive allocation decision on Asia and within Asia on India, rather than having an actively managed portfolio they would just go and buy an ETF.
Now I think you will see one feature of markets certainly for the next 2-3 years will be the increased popularity of ETFs and in terms of the Indian market, I think the foreign capital flows via ETFs will be an increasing feature of that market.( Now here the experts says that the flow will be slowed down or even reversed!This is totally opposite view.....Who to believe?I will go with Credit Suisse....) The bad news is that because ETFs tend to be very liquid, it might result of increased volatility in the market.( I have no problem with any type of volatility)..

My Commnets:
This interview has totally ruled out any apprehesion on anyones mind.
I have pasted this interview because Credit Sussie was among the first foreign brokarage who said that they were bullish on India when cheaps were down.
I have seen people arguing that experts can also makes mistakes and we should not follow them blindly but what about our mistakes.
Who will tell the mistake we make?We are ready to become a judge of others but when someone else points out our mistake it is very hard to digest.
And in that I also come.

1 comment:

  1. Hi Rajeev,
    Good interview. But as he says, i am also comfortable in putting my money in market when its at 15000, rather than at current level.
    But seriously the way things are going, I doubt that SENSEX will go to 14/15000 level.As I think all quarterly results for Dec. will be better than previous quarter.
    So lets see what happens!
    Right now my strategy is to invest partly at 10% up or 10% down.
    With Regards,