The latest credit crisis to have hit the world markets is likely to take “at least two quarters” to get over, till then Indian markets will also remain weak, Citigroup has predicted.
MUMBAI: The latest credit crisis to have hit the world markets is likely to take “at least two quarters” to get over, till then Indian markets will also remain weak, Citigroup has predicted.
“We are living in very confused times. The full extent of the credit market woes are yet to be seen. We are getting closer to a period of capitulation. It is going to be very hard for equity markets to maintain up-trends. It will take at least two quarters in my opinion,” Adrian Faure, managing director and head Asia Pacific, Citi Investment Research, said.
Faure was speaking to the press at Citi’s India investor conference on Tuesday. Citigroup is bullish on the India growth story in the long-term but said that the global downturn won’t miss India in the short term.
“We see the secular growth story of India in the next decade (but) we will have to deal with cyclical issues and downtrends. On a relative basis, Asia will do better but if the whole world is correcting and excesses of the last few years are taken out then Asia will feel the pain. Growth expectations are too high and earning numbers will come down,” Faure said.
He said that both India and China were expensive equity markets compared to the global level and predicted tough times in terms of returns in the short-term. “The returns will be negative in the next six months but overall it will be better than global markets,” he said.
Citi Investment Research’s director and India head Aditya Narain advises caution on the Indian equities market in the next two quarters. “Financial risks in the market are tending to go up. It’s time to be a bit cautious and look at visible growth. We are overweight on telecom and consumers and underweight on utilities and power. We have also cut changed our forecasts for capital goods from overweight to neutral,” he said.
Citigroup India economist, Rohini Malkani, has predicted a slowdown in the Indian economy in 2008-09 to 8.3% GDP growth due to a deteriorating global macro environment and higher domestic interest rates.
Malkani expects the Reserve Bank of India to cut its benchmark repo and reverse repo rates by 50 basis points post July.
“The RBI cut will come in the second half of the year because this being an election year the focus of the government and the central bank would be to contain inflation,” Malkani said.
r_joel@dnaindia.net
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