Subsidies can’t be essence of survival: FM to realty sector

Hopeful that the age of slowdown will end soon for the real estate business, Finance Minister Arun Jaitley today said the sector must survive on market economy and subsidies should not be the “essence of survival”.

He also asked the sector to submit their taxation related suggestions to the recently appointed panel on tax issues and said the government would seriously look into the final recommendations of the committee.

Speaking at a housing market conference here attended by real estate players and housing finance firms, Jaitley said the sector will be the next big mover as far as the Indian economy was concerned.

He said that easier availability of land for housing was very important while interest rates have already come down to bring down the cost of funding.

“The real estate should survive on market economy (and) subsidies should not be essence of survival for the industry,” Jaitley said.

He said that inflation has been brought under control and Reserve Bank has already cut rates four times this year, which was a positive move for the sector and “hopefully those moves are here to stay”.

“Age of slowdown for realty sector should now come to an end,” he said.

On macro issues, the finance minster said the global environment has not been helpful and the impact was visible in exports slowing down in India.

“The biggest strength of India and the silver lining is its resilience… Our systematic firewalls have to be such that the ability to resist the global volatility are strengthened,” he said.

“We are unquestionably one of the fastest, if not the fastest growing major economies… On revenue collection, the indications look more on the optimistic side,” Jaitley said.

The minister further said that the savings from low global commodity prices were being used in irrigation and infrastructure while improving the health of power sector was also one of the most important tasks.

“After roads and highways, very soon we will be looking into the issues of the power sector,” Jaitley said.

India needs more action to support fiscal stability: IMF

India needs to take further policy action to support external and fiscal stability in coming years and should focus on revenue-side measures and adopt additional structural reforms to sustain its strong growth, the IMF said today.

Observing that favorable policies and increased political certainty following 2014 election strenghned India’s economic activity, the International Monetary Fund (IMF) said, “Since 2013, reductions in spending have fostered some improvement in the fiscal deficit, and the current account deficit has narrowed considerably more than expected.”

The IMF in its latest Staff Sustainability Assessments for G-20 Mutual Assessment Process attributed this improvement to import compression associated with weak private investment, as well as a reduction in gold imports.

More recently, economic activity has been strengthening, as business and consumer confidence have rallied in response to favourable policies and increased political certainty following the 2014 election, it said.

Going forward, this strong growth is expected to continue as a result of lower oil prices and favourable policy measures, though inflation expectations remain elevated despite relatively tight monetary policy and lower global commodity prices, IMF said.

These positive developments notwithstanding, the IMF observed, further policy action is needed to support external and fiscal stability in coming years.

“In particular, reforms should include more emphasis on revenue-side measures and the adoption of additional structural reforms to boost potential output,” it said.

The main risks stem from a surge in global financial market volatility, slower-than-expected progress in addressing domestic supply-side bottlenecks, and a supply-induced spike in inflation, the IMF said.

According to the report, in coming years the current account deficit is expected to remain stable as downward pressure on imports associated with lower oil prices should be largely offset by stronger domestic demand and stronger external demand should buoy exports.

Still, the recent welcome increase of private investment could imply somewhat larger future external deficits, particularly if national saving does not increase, it noted.

The IMF said there are several risks to economic stability, from both domestic and external factors.

“On the external side, risks stem from the normalisation of monetary policy in advanced economies (the US in particular), which could increase global financial market volatility in the short term,” it said.

RBI allows NRIs to subscribe to National Pension System

To enable Indians living abroad to access old age income security, Reserve Bank allowed non-resident Indians (NRIs) to subscribe to the National Pension System (NPS).

“It has now been decided, in consultation with the Government, to enable National Pension System (NPS) as an investment option for NRIs under FEMA, 1999,” RBI said in a notification here.

NRIs may subscribe to the NPS governed and administered by the Pension Fund Regulatory and Development Authority (PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act, it said.

The subscription amounts shall be paid by the NRIs either by inward remittance through normal banking channels or out of funds held in their NRE/FCNR/NRO account.

The RBI, however, said there will be no restriction on repatriation of the annuity/ accumulated savings. NPS was launched on January, 1 2004 with the objective of providing retirement income to all the citizens.

NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens. Initially, NPS was introduced for the new Government recruits (except armed forces).

With effect from May 1, 2009, NPS has been provided for all citizens of the country, including the unorganised sector workers, on voluntary basis.

Axis, ICICI must-have stocks; mkt uptrend intact: HDFC Sec

There is no reason why one should not grab Axis Bank  at the current levels, suggests Dipen Sheth of HDFC Securities.  He urges investors to look at all parameters like NIM, loan growth etc and not agonise over NPAs. Sheth calls the private lender responsible for admitting its September quarter asset quality concerns.

He is also bullish on ICICI Bank  , which also has stressed assets, and advises to own the two stocks with a 2-year time horizon. “We remain buyers,” he told CNBC-TV18.

On the broader picture of the corporates which are reporting mixed numbers in the second quarter, Sheth said earnings are not a barometer for markets any longer. Despite the ho-hum results, the market’s long-term uptrend is intact. If the World Bank report says Ease of doing business has improved, it goes on to show the governance is improving, he said adding “the direction has evidently changed”.

Sonia: Earnings season has not gotten off to the best start but how have you read into it?

A: The numbers are all over the place so the good, the bad, the ugly, you can see them all. However, the bigger thing that I would want to say is that you are not going to look at this earnings season as kind of barometer to tell you where to drive and how to drive in this market. It has been that way for the last one or two earnings seasons and it will be that way for maybe another one at least if not more. The broader thesis of climate change should not get overshadowed by the weather; let us look at it that way.

Sonia: You are saying the long-term upside is still intact for the market?

A: Absolutely intact. There is news flow all over the place and if you look at the news headlines, media headlines are worried about the Bihar election outcome. We are slicing and dicing the result season right now as it were and with some justification I can say that we are agonising over the non-performing assets (NPA) problems. For example, yesterday with Axis Bank and now more with some of the PSU guys and so on and I don’t think that is unfair.

However, the larger thing is going to sound like a stuck record and I have been saying it for a year and even maybe a bit more than that, that we are in the throes of remarkable healing, something that happens once in maybe two, three or five decades. All this is old stuff, I am just repeating what I have said earlier, you have got a right off center government, you have got improving governance, you have jumped 12 places. Now let us look at that part of the news, you have jumped 12 places on the ease of doing business in the World Bank’s database and even that is based on assessments made out of two large metros in the country and not the rest of country. So, there are clearly things that are changing here. The two big weaknesses you have had and again this is old hat, is your excessive reliance on imported and costly fuel and poor governance mix. So, the fuel bit is happened, the governance bit is happening now.

I am not looking at company numbers so closely anymore. I am meeting governments, I am meeting bureaucrats, I am trying to understand how goods ad service tax (GST) will work out, I am trying to figure out how sate electricity boards (SEB) or discom dues will get cleared up. The person to research is Piyush Goyal for example.

Latha: Not to throw cold water on your enthusiasm but the previous year’s global ranking has gotten revised so we have been moved up to 130 so we have actually moved 4 points but the point is direction is up.

A: Direction is up after four or five years or I don’t know how many, it is 22 years or something.

Latha: We have to talk stocks and there the point is the reality on the ground is not changing, it is not changing with ferocity, it is not changing at all in some cases like in the case of Axis Bank. One had got the impression that some people have been smarter in dealing with lousy assets. We didn’t get confirmation of that when the results came in so what would you do with Axis Bank right now?

A: As analysts we were very clear that Axis does have exposure stressed sectors; a whole lot of banks do. It is a question of which bank is mature to accept, admit, recognise, classify and then provide for. If you are going to award marks for these virtues then Axis comes out top. Is there pain? Yes there is. Is there lots of pain? They took it on the chest or chin or whatever you want to call it yesterday or the day before.

However, look at this bank, when they had extraordinary or non-recurring profits coming from overseas or treasury activities and so on, they created a contingency reserve. They are using that headroom to absorb three fourths of a large asset, lumpy delinquency that happened in the quarter. I think they are behaving like extremely responsible bankers.

Latha: Are you buying it right away or would you wait to buy it?

A:  Can you time these things, you tell me? It was down 7 percent. We haven’t changed our stance. We are buyers here. It sounds completely counter-intuitive but like I said the weather is bad, the climate is going to improve from here. Look at the virtues of the bank, in their peer set, they are at 78 percent provision coverage ratio (PCR) which is the highest.

Their domestic net interest margins (NIMs) are string at 4 percent plus, loan growth is over 2x industry and valuations have now fallen to less than 2x FY17 adjusted book value and I am giving you consensus numbers. I am not even giving you mine. So, what is wrong here? All that is wrong is known and is baked into the numbers which have been reported and all that can go right is what we will play for now.

Sonia: Would you worry about the fact that Axis has reported higher stressed assets addition so that could perhaps translate or could be reflective of what other private banks are going through?

A: Of course.

Sonia: Would you worry that there could be further downsides in names like ICICI Bank, etc and would you use that as an opportunity to buy?

A: With an ICICI Bank let me tell you that the relative intensity of exposure to these sectors is probably higher at ICICI Bank. Our slicing and dicing tells us that net-net maybe there are more virtues to back at Axis at this point of time but it doesn’t take away anything from the fact that ICICI Bank has also got a great retail franchise. It has got very strong NIMs, very strong return ratios, very well capitalised, no risk of dilution. There is a context in which you have to love or hate these banks.

Latha: The intensity of exposure to stressed assets is discounted by the market to the extent that year-to-date (YTD) ICICI Bank is down 24 percent; Axis is down 4-5 percent.

A: Headline valuations are also 15-20 percent lower.

Latha: Are you a buyer on both?

A: We have got big overweight positions on both of them in our model portfolio which is underperforming and we are not rattled, which is underperforming relative to where it was say 9-12 months ago. Latha:

Axis has about 8 percent of its total book exposed to the stressed groups, overleveraged groups, companies and all those are still standard in the books of Axis. Axis said that they will do 5,700 in terms of stressed assets incremental; in the first half they have already done 5,000. So the chances are they will increase therefore I am asking you should you buy right away or will the market still discount that there could be further NPL recognition or stressed recognition in some fashion, 5:25 or some other fashion and therefore would there be a more attractive space to buy?

A: I do not have access to Axis’s loan books and I can’t look at every single let us say SMA2 account that they are sitting on right now. I don’t have it for ICICI Bank, I don’t have it for Yes Bank, you can name them all and I will say I don’t have access to this information. However, the fact is that if you are going to bet on the longer term trajectory of corporate health in this country improving over two years, then you should be doing an Systematic Investment Plan (SIP) in these guys; they are great banks.

Nifty could slip to 7800 in November F&O series: Edelweiss

Corporate earnings, the Federal Reserve stance on interest rates and the Bihar elections will be the three factors driving market sentiment near term, Yogesh Radke, Head of Quantitative Research at Edelweiss Securities tells CNBC-TV18.

He expects the Nifty to slip to 7800 in the November series.

The roll over cost for the November series is around 45-50 basis points compared to an average of around 70 basis points during a bull market.

This, Radke says, indicates that traders are rolling over their long positions, but cautiously.

Latha: What is the sense? 8,140 has held for the moment but is 8,100 still in danger of being seen today?

A: For the day, for sure I am expecting a bounce back in the market towards the end of the session. On an overall perspective the market has seen weakness for the November series. So, for the day, we may see some bounce back but for the November series I am expecting some more lower levels to be seen in the market.

Sonia: When you say lower levels what are we looking at? Do you think 7,500 level could hold or is there a threat that in the November series that could break as well?

A: 7,500 would be too low for that purpose. Obviously, we will have to evaluate how the market moves and how the events will shape up right from the Bihar elections to the Fed meeting and even the corporate results. All the three events would be driving the market.

At this junction, I would look at something like 7,800 level to be seen on the Nifty by the November series. If the pressure increases and the corporate results will not be as per the expectation, we may head lower, but that would be further after the November series.

Opening bell: Negative Nifty likely on weak global cues

The Indian equity market is likely to open on a slightly negative note with the SGX Nifty, an indicator of the market opening, trading at 8236.50, down 8.50 points at 7:20.

The market ended Tuesday with minor losses. The Sensex slipped 108.52 points or 0.4 percent at 27253.44 and the Nifty was down 27.65 points or 0.3 percent at 8232.90.

Global markets are unlikely to lend some support to Dalal Street as the US market ended lower ahead of the Fed statement today.

Asian markets have opened up mixed this morning on the back of a weak overnight handover. Nikkei though has bounced back on hopes of further stimulus from Bank of Japan as they await the outcome due later this week.

In other asset classes, the  dollar held firm against a basket of currencies as traders await the Fed’s decision on whether to raise interest rates by year-end amid evidence that the US economy has slowed in recent weeks.

And weakness in crude continues with the Nymex Crude trading at a 2-month lows on the persistent global supply glut ahead of US data expected to show another increase in crude inventories.

And precious metal gold remained flat at around USD 1160 an ounce.

Back home, in important earnings today Ambuja Cements will report numbers today. According to a CNBC-TV18 poll, the cement major may post a weak quarter with sales volumes expected to grow by 4-5 percent. Realisations, however, will remain weak.

Furthermore, the government has moved to bury the ghost of retrospective tax by setting up a 10-member panel headed by Justice Easwar to review income tax laws.

Meanwhile, India has moved up 12 places in Ease of Doing Business rankings released by World Bank

India up 4 places in ease of doing biz report: World Bank

India now ranks 130 out of 189 countries in the ease of doing business, moving up 12 places from 2014, according to a World Bank report. “A forward movement of 12 spots in the ease of doing business by an economy of the size of India is a ‘remarkable achievement,” World Bank’s Chief Economist and Senior Vice President Kaushik Basu said.

“For any big economy, a rank improvement of 12 is a remarkable achievement. Going from 142 in the world to 130, as India has done, is very good sign. It gives a good signal about the way things are moving in India,” Basu said in an interview as World Bank released its annual report ‘Doing Business 2016′ which is topped by Singapore, followed by New Zealand, Denmark, South Korea, Hong Kong, Britain and the US.

China is ranked 84 and Pakistan is at 138th place. Pakistan in fact has slipped 10 spots from 128 in 2014 while China has moved six spots in a year from 90 since the last report.

The World Bank said India, which has a global ranking of 130, implemented two reforms during the past year. For example, in starting a business, India eliminated the requirements for a paid-in minimum capital and a certificate to commence business operations, significantly streamlining the process for starting a business.

“What is significant about India is that they are in the middle of what appears to be a very, very ambitious process of reforms affecting a broad range of areas captured by the Doing Business indicators,” Lopez Claros, Director of the Global Indicators Group World Bank, said during a conference call.

“My expectation, therefore, is that if this process continues, if it is sustained, and the authorities show the degree of determination which has been in evidence in 2014, then we could see substantial improvements in coming year,” he said.

Observing that the potential to see kind of a rapid economic growth in India is very high, Claros said it has very favourable demographics, and to the extent that some of the bottlenecks that the Doing Business data identified in India are removed, the potential benefits could be quite large.

“And India being India, that is a large economy. This could have also international repercussions in terms of the impact on the global economy,” he said.

Claros said there is a great deal of work underway in India to design a policy that will be modest and friendly. “And the improvement that you have seen in India’s Doing Business ranking this year is kind of an early recognition of these efforts, but more is coming,” he added.

India stands for having made big strides toward better and more efficient business regulation. In 2004 it took 127 days to start a business in India. In 2005 this has been reduced to 29 days, the report said.

In India the establishment of debt recovery tribunals reduced non-performing loans by 28 percent and lowered interest rates on larger loans, suggesting that faster processing of debt recovery cases cut the cost of credit. Research also shows that a badly designed tax system can be a big deterrent for businesses, it said.

In 2010, India established an online system for value added tax registration and replaced the physical stamp previously required with an online version. “In the past year India eliminated the paid-in minimum capital requirement and streamlined the process for starting a business. More reforms are ongoing – in starting a business and other areas measured by Doing Business – though the full effects have yet to be felt,” it said.

India made starting a business easier by eliminating the minimum capital requirement and the need to obtain a certificate to commence business operations. This reform applies to both Delhi and Mumbai, it said.

The utility in Delhi made the process for getting an electricity connection simpler and faster by eliminating the internal wiring inspection by the Electrical Inspectorate. The utility in Mumbai reduced the procedures and time required to connect to electricity by improving internal work processes and coordination, it said.

The report said in dealing with construction permits, India ranks 183 and in registering property it ranks 138. But in getting electricity India is now ranked at the 70th spot. In protecting minority investors, India now ranks eighth and in getting credit it is now placed at the 42nd spot. In paying taxes and enforcing contracts India is now ranked at 157th and 178th spots respectively.

In trading across borders, India ranks 133rd and in resolving insolvency, it ranks 136th, the report said.

The Doing Business report records 22 economies worldwide with resolution times above 1,000 days and four of them are in the South Asia region, namely Afghanistan, Bangladesh, India, and Sri Lanka.

Furthermore, it takes entrepreneurs in the region an average 98 days to register property, which is more than twice the global average.

Pakistan in was ranked 128 and Bhutan was 125. India was ranked 142, Afghanistan 183, Bangladesh 173. In 2014, India was ranked 158 in starting a business, dealing with construction permits (158), Getting electricity (137), Registering property (121), Getting Credit (36) Protecting minority investors (seven), paying taxes(156), trading across borders (126), enforcing contracts (186), and Resolving insolvency (137)

Q2 topline growth subdued, but margin expansion good: Ambit

What global markets want at this point is some fiscal stimulus from China, says Andrew Holland of Ambit Investment Advisors. “If China can somehow stabilise, that is all the uplift that the markets will need,” he told CNBC-TV18. He says the market did not take China lowering rates positively.

As far as the earnings season in India is concerned, Holland is fairly encouraged by it. He says though the topline growth in the second quarter has been subdued, margin expansion has been encouraging. He sees this helping companies in the following year as well.

He is bullish on the banking sector, especially private sector banks, as he believes there is still room for the Reserve Bank governor Raghuram Rajan to go in for more rate cuts. However, he is not too keen on the NBFC space and prefers banks over it.

As far as other sectors are concerned, he believes IT stocks will continue to be under pressure in the coming days and signs of pressure are rather visible in the telecom space as well. He also feels there are far too many regulatory issues facing pharma companies and since valuations are demanding, any negative news gets reflected in stock prices rather quickly.

Sonia: In the last couple of months, the market has had a decent performance. We have risen from that 7,500 level and now at 8,200 plus. What is the sense you are getting about the traction from now until the end of the year?

A: This week is an important week because of Fed and Bank of Japan (BoJ). So, let us see what comes out of that. Also, we have got this five-year plan being etched out in China. So, again we could see something from there. I think the markets are still climbing the ball of worry on China.

Despite interest rates coming down, it is not seeing this a positive and I think what the market still wants from China is some kind of fiscal stimulus to make us all feel that the economy is being looked after and there are incentives there for the economy to at least stabilise if not grow from where we are. Until we get that, where markets are going to be continues to be a little bit volatile because the numbers coming out of China that still no one is believing and that is bad enough. However, if China can just stabilise what we are thinking about the economy and that would be the uplift we need not just for our market but for global markets as well. So, that is what we are looking for. I think that is the key to us, is what China does next.

Latha: How has the earnings scene looked so far for you, more disappointments or on expected lines?

A: I am very encouraged because what you are seeing for the first time is whilst we have a topline growth which is not so great, the operational gearing, it is starting to have an positive impact on margins and also the impact of lower commodity prices is also helping margins.

So, I am very encouraged that the net profit on the profitability of companies is starting to improve mainly at the operating level and next year that will continue to help the earnings momentum going forward. So, I am actually more encouraged this time; I think I have seen more upgrades than downgrades so far.

Sonia: You have long positions in names like Asian Paints and this time the consumption story has actually seen slower growth than what we have seen in the last couple of quarters whether paint companies, whether it is white goods companies. Would that worry you or do you think it is just a patchy phase?

A: The operating margins for the likes of these companies have improved significantly because of the lower input cost so therefore there is only so much benefit you can get from that. However, in other industries now, you are starting to see the impact of lower commodity prices; that is the point I am trying to make. It is not necessarily the industries we know and have benefitted from that in the past year in a bit. It is newer industries which are starting to benefit from it.


FinMin to consider repealing retrospective tax: Sources

The Finance Ministry is considering repealing the controversial retrospective tax, sources tell CNBC-TV18.

Retrospective or retro tax, laid down by the UPA government, enables the government to raise tax demands on earlier or long concluded deals. In 2014, the Finance Minister Arun Jaitley had ruled out resorting to retrospective tax amendment.

Minister of State Jayant Sinha has been assigned the task to find a solution and is expected to seek help from an expert committee to look into the tax matter.

CNBC-TV18’s Nayantara Rai reports that the companies are looking at more groundwork on the issue than just a verbal assertion by the government to end retro tax era.

Global investors time and again have raised the issue on the retro tax.

Dinesh Kanabar of Dhruva Advisors said that retro tax is the only negative blip for foreign investors.

Kanabar said that the retro tax made planning difficult for foreign investors and repealing it will make business more attractive for the global investors.

Central banks infusing stimulus shows growth is slow: Pros

Whether it is the European Central Bank (ECB) talking about extending quantitative easing (QE) or extending the size of it or the Chinese central bank lowering interest rates with the aim of infusing stimulus are all signs of growth slowing down, is the word coming in from Arvind Sanger of Geosphere Capital Management. But, on the brighter side, it will ease liquidity pressures, he adds.

Viktor Shvets of Macquarie too broadly concurs with Sanger’s view on these being signs of slow growth. He, however, feels there will a contraction in liquidity from hereon.

Sanger says, as far as India is concerned, he is buying what he likes, but is being patient on valuations. “Liquidity will be plentiful, but growth will be rare,” he told CNBC-TV18. He is looking for companies with comfortable growth trajectory.

Shvets too says India is on his buying list; but only selectively.

Also, both Shvets and Sanger say India will be a beneficiary of lower commodity prices and it does not have any major macro headwinds.

Latha: How would you rate this Chinese action? Is it all green as the markets have interpreted or would you worry that in a bit the underlying message of slowdown will hit?

Sanger: Right now we have this mix message, last week Draghi and European Central Bank (ECB) talked about revisiting either extending or increasing the size of quantitative easing (QE) when they meet in December, on Friday we got the rate cut of China, these are all signs of slow growth. So at the end of the day it is one of those bad news is good news that if there is more bad economic news which clearly there continues to be sluggish economic news out of both Europe and China, and China’s action therefore to cut interest rates is to offset that. Frankly we don’t think of it as having any meaningful effect on our growth expectations out of China but it will certainly help ease the liquidity issues that they are having because of the amount of the money that they have been spending.

Latha: After getting both these news are you going out and buying risk assets?

Sanger: No, I think we are buying what we like and we are being patient on valuations but we are not saying it is time to buy the markets with both hands because there is more liquidity. I would say that at the end of the day the good news is that liquidity is going to be plentiful and the bad news is that growth is going to be rare.

So, we continue to look for companies where we can feel comfortable about growth because that is rare missing component in global and Indian markets right now. Indian markets so far this quarter have also had somewhat sluggish if not absent growth as an overall market. So, that is the key challenge in India, in emerging markets and even in the US. I think the growth aspect in finding companies that can deliver growth is a real challenge.

Sonia: Do you think that the Central Bank led liquidity rally could perhaps extend itself?

Shvets: No, I don’t think so because I don’t believe there will be any liquidity either. If anything liquidity is likely to contract as we go forward.

In fact, what you are seeing is that US dollar denominated global gross domestic product (GDP) is already shrinking, US dollar denominated international trade is already shrinking and so the more Bank of Japan, ECB or People’s Bank of China (PBOC) do in terms of stimulating and in terms of generating liquidity, the less ultimately liquidity there is going to end up.

So what you see right now is sort of Pavlovian reflex — liquidity means higher financial asset prices but that is no longer the case. That was the case five-six-seven years ago but today global velocity of money is so low and has been slumping so quickly that I do not believe it is sustainable. In fact if anything liquidity is likely to get less not more.

Latha: Let me come to what the Chinese policymakers have done, with the reserve requirement cut, the cash released into the system is 600-700 billion yuan, that is what USD 93-100 billion, will you on that news buy Chinese stocks or those who trade with China?

Shvets: Not on those news at all. All Chinese are doing is just replacing liquidity that is leaving. In other words, they are making sure that overall there is no liquidity contraction in China and I think they have a capability of doing that because the reserve requirement ratio is very high, their real interest rates are very high. So they have a capability of doing it.

However, that doesn’t imply necessarily that you are injecting a lot more liquidity in terms of buying China. We are buying China for different reasons but we are buyers of China primarily because we are still very much in a deflationary mood and will stay in that mood for years to come.

So commodity consumers rather than commodity producers generally should do better and the countries that have trapped domestic liquidity should do better than countries that completely depend on the global flows. I think China fulfils that criteria. So we are still in China but not because they have just injected a little bit of money in order to stabilise the liquidity.

Sonia: You just mentioned that you continue buying markets that you like. Is India on your buy list? Sanger: Yes but selectively. At the end of the day we are not making broad market calls, we are looking for where can we find growth, where can we find companies that have a bottom-up story that is growth sustainable and where there are no obvious headwinds from a macro standpoint. I think right now India has at least some companies and some sectors where growth is visible. India doesn’t have any obvious macro headwinds as the other speaker just said.

In a low commodity price environment and in a global deflationary, low growth environment India is one of the beneficiaries of that backdrop and therefore as a macro standpoint there aren’t any obvious headwinds in India. On the other hand, if you look at markets like Brazil and other markets that are China commodity dependent, I don’t think the rate cut makes any difference in terms of any expectations of any big boom or even a small boom coming from this rate cut in terms of commodity demand.

Latha: The Indian markets like many other emerging markets are over 10 percent higher from their recent lows. The Nifty  for instance was about 7,500 about four weeks back, it is quite a rally. At this level would you still buy or is there some positivity from the fact that foreign flows have resumed and domestic flows have been robust for some time now? 

Shvets: I don’t think it is meaningful to look at indicators like flow of money because it is not particularly useful. What we tend to look at India is far more in a context of a global call in other words commodity consumers versus producers, domestic liquidity would dependent on global liquidity. We also tend to look at India in terms of political pressures and structural reform and we tend to look at India as a PE market rather than earnings market.

Whenever you are in a PE rerating types of markets, the investors tend to be very forgiving on those markets skipping and not achieving earnings per share (EPS) estimates because there is no question that Indian EPS for the next 12 months is outrageously high. There is no way those estimates will ever be fulfilled.

So, the way I look at it, so long as there is some element of structural reform, so long as there is some degree of political stability and so long as there is some degree of monetary capability, I am still predisposed more towards India than say Indonesia. So, when you say your market topped 10 percent, Indonesian market upped 20 percent in US dollar terms, far more than what India has achieved so far. So, would you rather be in Indonesia right now or would you rather be in India? I still would prefer to stay in India.

Latha: Do you expect this ongoing risk-on rally across the world to continue for a goodish bit?

Shvets: I would say there is a tendency of markets to melt up towards the end of the year and we are probably going to see it. If that is the period of time you are looking at then it is possible. Beyond that, I doubt it will continue.

Sanger: I would agree with that. I think we do have a year; we are setting ourselves up for a year-end rally as long as the market is kind of buying this feel good phenomena right now. However, the real question which comes with all of this injection of QE or similar liquidity supported measures, is there any growth? I think that is one the challenges that we are going to face in the coming months but we may have some room here for the rally continuing.