Rising crude oil and U.S. bond yields haven't diminished Mark Matthew's love for Indian equities. “The country has more positives than negatives,” the head of research (Asia) at the Swiss-based wealth manager Bank Julius Baer told BloombergQuint.
He gave four reasons for his bullish India view:
- The long-term structural story looks good with a large and relatively young population.
- While there have been “hiccups” with implementation of reforms, they are undeniably a positive. India will see more structural reforms if the Bharatiya Janata Party returns to power in the coming general elections.
- India’s corporate earnings are meeting estimates for the first season in four years; can expect earnings growth in high-teens.
- Domestic flows remain strong.
Rupee Woes May Ease
The U.S. dollar is well supported by the bond yields but it’s not clear whether it will keep sky-rocketing, Matthew said. For the rupee -- down nearly 1 percent this week -- the silver lining is the hawkish tone of the Monetary Policy Committee, which raised expectations of rate hike this year. This may lead to some relief for the Indian currency, he said.
No Risks From U.S. Bond Yields, Crude
Yields on the benchmark 10-year note are once again bumping up against the psychologically important 3 percent level. WTI crude oil is trading at $68 per barrel after breaching the $70-mark last week.
But Matthew isn't worried about their impact on Asian markets. “U.S. yields have been twice as high on average,” he said, adding that investors will get used to it being at the 3 percent level. Crude on the other hand, he said, will flatten around the current levels.
Watch the full conversation here: