Time to go risk-off; take cash out of equity and look at investing in bonds, says Port Shelter Invst Mgmt

India specific, he said, “The situation with Yes Bank is quite serious and it does have a slight faint overtones or rhymes with what happened in 2008 in the US. It’s clearly a negative sign.”

“Most of the banks in the major western markets such as the US and Europe had a big scare during the global financial crisis and most of them are now well capitalized, but of course the big questions hang – Deutsche Bank and in some other markets like Yes Bank. In China people haven’t necessarily learned the lessons of shadow banking, investing too much in a particular group where the individual has too much counterparty risk and these things will happen as soon as there is a bit of a wobble in the market,” Harris added.

According to him, emerging markets are falling in-line with markets elsewhere. “If the US is concerned, if Europe is falling then it’s very difficult for emerging markets to move ahead. There is still a big question about where the virus is going to go and how that is going to be handled in emerging markets. "

The general view on the risk-off situation with international investors is that they going to say to stay out of emerging markets, at least not to put money in and maybe to raise a little cash,” said Harris.

When asked about his base case scenario for Indian markets, Harris said, apart from last year, India has had an extremely good performance on its equity market. It has been one of the best performing markets in the world and the current weakness should not be seen as a disaster and same is the case for US as well. So, if the markets come-off 20 percent it must be seen in light of the fact that they had gone up 30 percent in the last couple of  years and so we still need to be fairly calm about this, he added.

“Even if we do end up in a bear market that is 20 percent down, long-term investors will still be sitting on a lot of profit,” he added.