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D. Murali
Kumar Shankar Roy

Chennai, Aug. 11 Be it 15,000 or 14,000: nobody knows where the bottom of the market lies. While investment pundits are now thinking twice before saying that markets have bottomed out, others are questioning the very idea of a ‘bottom.’ “All the talk about market touching its bottom is not really helpful as nobody knows where that is. Not many know where to sell and where to buy. Nobody knows where the bottom is,” Mr Tuan Huynh, Chief Investment Officer (India and China), Deustche Bank told Business Line on Monday.

So what’s his message to the high-networth investors that he came to meet on his India trip? “Diversification is key. We are currently neutral on equities and underweight on debt. Investors can take exposure to gold through exchange-traded funds or buying shares of gold mining companies. Real estate can also be given a second look. Special offerings that seek to invest in private equity are also recommended but obviously with a longer investment horizon,” Mr Huynh said.

Deutsche Bank Research had previously estimated that the total value of all of the country’s goods and services produced in a year might grow by an average 6 per cent till 2020. Inflation remains a major concern to the growth as the low-base effect is set to continue even as the central bank is in a ‘rate-hike’ mode. “Inflation has not peaked out yet. In a month or so, inflation might go up to 12.5-13 per cent. But by the end of this fiscal year, it might be around 8 per cent — that is above the central bank’s expectations,” Mr Huynh, who is responsible for the regional market house view, remarked.

The RBI Governor, Dr Y.V. Reddy, expects inflation to start softening in the third quarter of this fiscal and eventually may come down to 7 per cent in the fourth quarter.

India will remain a market performer this year (benchmarked against MSCI Asia India), he added. On the rupee outlook, Mr Huynh said that the medium-term target is Rs 40 a dollar, which might hurt exporters but “like Chinese have, Indian exporters also need to compete without banking too much on the support from the domestic currency.”

While he remains confident of the India story in the medium-term, inflation – which is at a thirteen-year high – is more than a cause of concern for him.

The recent fall in oil prices may have soothed markets but Mr Huynh isn’t much impressed.

“The geopolitical risks in the Middle East with new threats to Iran from Israel continue. We expect oil prices to stay near current high levels over the next 12 months,” he has said in a recent report outlining the Deutsche Bank outlook for July to September 2008.

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