Geoff Lewis, head, investment services, JF Asset Management, believes that there is no chance of the Fed rate going to 6-6.25% and expects maximum one or two more quarter points increase.
He further adds that liquidity is in the process of being withdrawn and that is not good for emerging markets but it is not a big crunch as yet. He also believes that India has the strongest growth story for the next 10 years.
Excerpts with CNBC-TV18's exclusive interview with Geoff Lewis:
How do you feel after listening to what the Fed had to say and the emerging market reaction this morning?
I think that the Fed, always talks tough right up till the end, and they never give much away. If one looks at the previous cycles, they have done this before. I think the main thing is, whether we are just one more or two more quarter points away form the peak, that the case is different from rates continuing to go up to 6, 6.50%. But we don't see any chance of that at all. So I think soon markets will be able to bank on better news from the Fed.
The Fed said that they would look at the evolution of inflation and economic growth; do you think this statement was more concrete than what they said in May?
They changed it but we always knew that it was going to be data dependent at this stage. I do agree with Andrew Holland, that it is going to be fairly volatile for some time to come, because nobody including the Fed, is quite sure where it's going to stop.
But unless we get some signs of a poor inflation trend, which we don't have at the moment, it should just be a case of one or two more quarter points. I don't think
The Central worry, for all emerging markets including us, was that if the Fed continues to tighten what happens to emerging market liquidity, which is one of the big bull walks of this rally to begin with. Do you think this changes the picture, or can we expect easier liquidity in our markets for the next 3-4 months?
Certainly some of the Asian liquidity indicators I have seen, already suggest that it has tightened quite a bit; that really shows quite an impact already. But as I said, I don't really see the Fed going to continue to raise interest rates. So yes, liquidity is in the process of being withdrawn and that is not good for emerging markets, but it is not a big crunch as yet.
Do you see redemptions easing off from what happened in May and maybe early June, do you see fresh money coming at all into emerging market funds including yours in India?
Yes, I think the redemptions are easing off. What is interesting is that in Asia, whilst there has been strong redemptions, there has also has been strong purchasing as well. Some people have been coming in at these levels and others have been taking profits, so that is quite a healthy sign I think.
What is your call on India now, at the 10,200 kinds of Index levels, given what is happening around the world?
As asset managers we don't like to make Index calls for short-term. But I think India has one of the strongest growth stories anywhere in the world for the next ten years.
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