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Thursday, February 14th, 2019

The statement from fed chair Powell yesterday is very significant

The statement from fed chair Powell yesterday is very significant and can lead to an upmove in Emerging Markets (bonds, equities and currencies). Also considering that EMs underwent a tough year in 2018, I believe there will be a sharp bounce. Maybe it’s already begun. India is likely to be a beneficiary of this bounce.

 

Indian investors are cautious due to reasons like elections worries, some large companies in negative newsflow, worries on fiscal deficit etc. However, elections have not impacted long term returns for investors. Result season is going quite well. Unfortunately in such market sentiments, only result misses are getting highlighted and discussed. Inflation is low. Interest rates have softened.

 

FIIs have been reducing India weight since February 2015 and overweight on India has almost disappeared. Net Bulk investments ex ETF in mutual funds is negative. Valuations are not euphoric.

 

When people are risk aware, valuations are low, and there are more opportunities for making good investments.

 

Considering all this, Indian equities can have an upward bias. Yes there is a probability of some sharp moves during budget session on any negative announcement. But the odds are still in favour of an upmove in the market.