Buy India on dips in market

The Reserve Bank of India (RBI) moves to ease interest rates and at the same time improve liquidity to help borrowers’ benefits from low rates could be a game changer for the economy. Falling interest rates in EMs like India and Indonesia will be tailwinds in the next 12 months.

If we look at some of the early indicators for corporate capex such as truck sales, they are now turning around, they look very encouraging, the Purchasing Managers' Index (PMIs), which is still a relatively low number, at least are moving up. We are looking at the first two months of cement sales plus 10 %. So I think there is a degree of momentum building in some of the leading indicators of capex and we have a decline in real interest rates for the industrial sector and that looks very encouraging.

There has been a significant change in attitude towards emerging markets in the last month. We are having conversations with the long only managers about whether they are willing to increase their exposure to emerging markets. That discussion is at a very early days but considering how bearish they are, it is either they are going to do nothing or they are going to add and I think they are going to add.

India is still a market that is a buy on dips: Definitely, it is a buy on dips. As we are discussing with monetary policy here, as we look at emerging markets globally, the places with high nominal interest rates would be India or Indonesia.

There is room for Federal Reserve to hike rates two more times. Any rate hike will be an indication of improving US economy.