homeeconomy NewsFed rate cut will provide liquidity but won't mitigate risk, says Geosphere Capital’s Arvind Sanger
Fed rate cut will provide liquidity but won't mitigate risk, says Geosphere Capital’s Arvind Sanger
In an interview to CNBCTV18, James Sullivan, MD-Asia Equity Research at JPMorgan and Arvind Sanger, Managing Partner of Geosphere Capital Management spoke at length about Fed's rate cut and where do we go in terms of macros and markets.
In an interview to CNBCTV18, James Sullivan, MD-Asia Equity Research at JPMorgan and Arvind Sanger, Managing Partner of Geosphere Capital Management spoke at length about Fed's rate cut and where do we go in terms of macros and markets.
Talking about the rate cut, Sanger said, “I don’t think there is any magic wand that central banks or anybody else have. Yes, its provides some additional liquidity but we would still stay in a nibbling mode because we need to see how the virus plays out until we get a sense how bad things get in the US, in developed and emerging markets. We would not be too brave to step out because we don’t know how bad the fundamentals will be.”
He further said that the market can head lower if virus risk turns out to be worse than anticipated.
“The fiscal stimulus is going to have to be an important part of the consideration. If I look at the US in 2008, there was a troubled asset relief program (TARP). Right now you have businesses that are going to be suffering a lot; everything from travel, hotels, food, all kinds of establishments are going to be suffering and a great cut alone is not going to suffice,” Sanger added.
When asked about Indian market, “As I said I would start nibbling but I wouldn’t commit all my money at this point because one needs to be cautious that we don’t know how bad things are going to get, but what investors need to do is have a list of high-quality companies that they are comfortable owning early and then buying some of the more speculative names later in the whole market cycle as we start to get a sense that worse is behind us.”
Therefore, not keen on buying richly valued urban consumption stocks like PVR, said Sanger.
According to him, rural facing stocks may be seen as an area of relative safety.
Since the Covid-19 virus became a global factor, said JPMorgan’s James Sullivan, “We have seen 14 central banks cut.”
“On JPMorgan forecast, we have additional 17 central banks around the world cutting over the course of the next couple of months providing significant monetary policy support to the global economy,” he added.
“However, if the virus impact is a time constraint event, if it effectively starts to work its way through the global economy by the end of the first half, we stand a strong potential of entering second half with very large amount of both monetary and fiscal stimulus starting to make its way into markets and economies globally,” added Sullivan.
He further said that the markets are not cheap yet and we will see some demand destruction going ahead.
On India front, he mentioned, the Indian market is still very richly valued and not finding cheap stocks in India.
“For India, the significantly greater risk is on the earnings revision side and not on the GDP revision side. The broader macro statistics that we are seeing in India have started to firm and we are getting more confidence in stabilization and not necessarily acceleration of growth but we do see a lot of corporate earnings risk moving forward,” Sullivan further added.
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