Markets in turmoil: analyst views- 1) Jyotivardhan Jaipuria, managing director and head of research at Bank of America-Merrill Lynch Sentiments of investors on India have turned negative and they seem genuinely concerned of the risk of the policy mistake in order to curb the currency volatility. Our latest fund managers survey shows that the Indian markets are now less loved than what they were three months back. However, these sentiments are still some distance away from the extreme bearishness of the past. Even most of the key technical indicators also show that while Indian markets are not liked but are not in the oversold territory. Any policy mistake could likely result in accelerated selling by the FIIs which could bring down the markets rapidly. 2) Robert Prior-Wandesforde, head of economics research for Southeast Asia and India, Credit Suisse One thing certain about the Indian macro economy right now is that it is hard to be optimistic. The current feeling of gloom is seemingly all pervasive as business and consumer confidence continue to shrink, the hard data continue to soften, the rupee faces substantial pressure, the RBI tightens liquidity and political factors remain unhelpful. Our central scenario is that Raghuram Rajan will shortly indicate that his primary goal, at least initially, is to stabilise the rupee, with the policy authorities backing this up with a series of measures designed to squeeze liquidity further, reduce the current account deficit and ease the financing of the external shortfall. 3) Sonal Varma, economist, Nomura Despite recent RBI tightening measures and the government’s game-plan to fix the balance of payments deficit, INR/USD has continued to depreciate. Hence, with gross capital inflows not in its control, the RBI is trying to tighten the noose around resident outflows. According to the RBI’s balance of payments data, private remittances abroad totaled USD3.3bn in FY13, while outward FDI totaled USD12.6bn. In our view, the RBI measures may have only a minor impact on resident remittances, but could have a relatively larger impact on outward FDI. Indian companies’ outward FDI have been growing in recent years for various reasons (pursuing growth markets, technology, natural resource etc.) and these could be adversely hit. While the authorities aim to reduce ‘FX volatility’, we fear that they may end up sending a panic signal.
Posted on: Tue, 20 Aug 2013 06:14:46 +0000
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