![Mark Matthews-Julius Baer](https://img.etimg.com/thumb/msid-110890205,width-210,height-158,imgsize-18394,resizemode-75/mark-matthews-julius-baer.jpg)
What exactly you believe the investors are prepping for when it comes to the Fed move?
Nobody expects a cut from the Fed in its coming meeting. But as you rightly pointed out, the European Central Bank has cut rates. The Bank of Canada did too last week. So, I think the big developed markets, central banks are moving and the inflation readings in the US should continue to moderate. We cover about 20 leading indicators of personal consumption expenditure prices, which is the Fed's favourite measure of inflation. It is the most accurate and the majority of those are continuing to suggest that inflation will approach 2% by the end of this year. So, we think that the Fed will cut rates in September and then again, another cut in November and another in December and that is something that should be welcome for the market.
I like to draw your attention to what is happening in India. The election cycle is over. NDA has come back to power. The cabinet was announced. And if you just read the news, the formation of the cabinet is identical to what it was in the earlier term of the NDA government. So, from global investor standpoint, what is the messaging and how would you read into this entire event?
Well, there was another election on the other side of the world almost at the same time, which was in Mexico. And there, there was a left wing, that government was elected and their stock market has tanked since then. Whereas, as you know, the Nifty is just half a percent away from all-time high and so it has been a totally different reaction, which I think is indicative of, as you say, the continuity in the government.
And the other thing I would say is that if India was a small economy and there was not a lot of just organic growth in front of it, then I would be concerned about less reform because you would need reform in order to get better growth in a smaller and more mature economy. But India is a country of 1.4 billion people on its way to 1.7. There is just so much organic growth in front of it that even if the reform-based growth decelerates a bit, and I am not saying it will, but intuitively it could be based on the fall in BJP votes in the rural areas of the north, even so I still think that we are looking at a very healthy rate of organic growth in the country, we say about 7% per year, let us put it like that and that should translate into earnings growth in the low-double digits.
So, with that in mind, I think that the Nifty is right to be where it is and we are looking for about another 7% to get to 25,000 by the end of this year.
The appeal for India story is quite robust and in terms of the demographics, in terms of the positioning, and in terms of the quality of companies. Yet, if I look at the foreign commitment towards India, it has been pretty dull and dry, at least this year. Foreign institutional investors have been net sellers of about $10-12 billion. Do you see that changing now that the election risk is behind us?
No, I do not really. I mean, over time, I believe foreigners will have to put more money into India as it grows and it gets larger in global benchmarks and the bond market will show us the way first, of course, with the inclusion of India in the JPMorgan Emerging Market Bond Index at the end of this month and I think a couple of other bond indices will follow.
So, over time, as it is wading in, global financial market indices rises. Foreigners will just have to allocate more. And as to the selling so far this year, I do not know why it is happening, but I guess that given foreigners already are quite underweight India and they were at the beginning of this year as well, the people who did have exposure were probably more emerging market specialist type of investors and they have been reallocating to China as China's government is making some pretty serious moves to address the problems in their economy. Regardless, I do think over time, foreigners will have to allocate more to India as it grows.
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(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2024 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price