Indian
markets may see a short term fall but India’s long term prospects look good. Experts
say that the downgrade was expected and this could be a good opportunity to buy
fundamentally sound companies.
Mumbai: Indian
markets could be in for some more trouble in the short term following the US
credit rating downgrade by S&P from ‘AAA’ to ‘AA+’ for the first time in
the country’s history due to its burgeoning debt. Media reports state that the
US Treasury Department has called the downgrade flawed.
We spoke to
industry experts on what this means for Indian markets and what should your
investors be doing?
Arindam Ghosh, CEO,
Mirae Asset Mutual Fund is of the view that there could be some shift to safe
assets and feels this could be a good buying opportunity.
“Risk aversion
would get further heightened. There is a possibility of money moving in to
safer assets. We may see some pullback of funds which could have some
intermittent volatility and downward pressure on the Indian markets. There are
strong headwinds in the short term. Investors should look at this as a serious
buying opportunity as valuations have turned attractive. At these levels, one
could go for lump sum investments because people didn’t realize a similar
opportunity in 2008.”
I. V. Subramaniam, Director & CIO, Quantum Advisors has a similar
view. “It may have a one-time effect until the money flow gets adjusted. From
an economic point of view, there is no need for India to get worried. As long
as we are clocking 6.5 percent to 7 percent GDP growth, there is nothing to
worry but there could be some temporary dislocation due to capital inflows. It
will not take too long for India to recover. Those investors who have a bulk
amount and entering the market for the first time can invest 50 to 70 percent lump
sum and the balance can be invested in a staggered manner,” says I. V.
Subramaniam.
David Pezarkar,
Head Equity, Daiwa AMC says that the downgrade was expected and some of it is
already priced in the market. He believes that there will be no direct impact
of the downgrade on Indian markets.
“There will be some kind of knee jerk reaction. The US bonds are still of highest investment grade. If the bonds are downgraded, then the banks have to set aside a higher capital. So it is not going to affect bank capital. There is no credible alternative to the dollar as yet. While it is definitely not a booster for markets, it will not create a panic and even if it happens it will be for short term as the downgrade was not totally unexpected.”
Let us know what
you feel about this development.
