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He is not saying with certainty that money can be made by investing in Indian equities, but he is most definitely positive of a relative outperformance.
Below is the verbatim transcript of Nick Parsons' interview on CNBC-TV18
Q: Could you just highlight what you thought of the reaction of the rupee post the US Fed taper?
A: The best word to describe the rupee was resilient. If we remember back in the May-June period when Federal Reserve chairman Ben Bernanke first started to talk about it, that kicked-off a period of extreme weakness in the rupee, particularly that is all the way up to that record high of 68.84 against the US dollar and yet over the course of last three days the rupee barely moved, we have been from just below 62 to just above it. Even if you were to take the entire movement from the December low, if we go back to December 9, just a week ago, we were 60.84 and we have now come to 62.17.
If I was sitting in the RBI I would look at it with some ratification and comfort. The currency has been resilient. It has been able to withstand the early stages of tapering extremely well and once again we are seeing the outperformance of Indian markets relative to major markets throughout the EM universe. So I would say it has been a very resilient performance and I would imagine that officials are very happy with the way the things have evolved.
Q: Are you surprised by the strength in equity markets? We did have a kneejerk yesterday, but today we have bounced back and they are trading higher than the level that we traded at. In general the emerging markets and Asian markets have completely ignored the taper news.
A: I would not say that EMs have ignored it. If you look just overnight China is down 2 percent. We have got South Korea barely changed. If we look through all the major markets only India is up 0.8 percent on the Sensex. We are up 7 percent year-to-date. China is down 9 percent. South Korea is flat. It is an absolutely excellent performance from Indian markets, both in relative and absolute terms.
Q: How would you position yourself towards India then?
A: I think again looking for relative outperformance. It seems to me that growth forecasts have probably been cut onto the pessimistic side, so that there is more chance of a positive surprise in 2014 relative to the baseline, whereas in 2013 we entered the year with a consensus generally high and there was scope for disappointment. We have to say that there is potentially some scope for positive surprise. We are talking here about relative outperformance rather than absolutely saying that the way to make money is to be long of Indian equities. It would seem at the moment given the momentum that is there that we could see relative outperformance which means that India does better than other markets.
It does not mean that in absolute terms they are going to go up. My fear is that if it is Q1 next year, all markets, both developed and emerging markets have got a lot priced into them at current levels. So back that word that I used at the start - resilience. We are trying to find markets that would offer some relative outperformance in the event of a downturn and it is from that we take encouragement about the performance of Indian markets recently.
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