Rakesh Jhunjhunwala, a partner at Rare Enterprises and ace investor, does not expect any tightening by the US Federal Reserve before 2023.
Speaking in an interview with CNBC-TV18, he said, “I do not see any Fed tightening before 2023 and the tapering also – I read the original Fed statement and people interpreting all sort of things, but what they (Fed) clearly said is that as long as their goals of full employment and moderate monetary policy are not fulfilled, they are not going to do any tapering; they intend to continue it.”
This is the primary reason, Jhunjhunwala thinks, behind the markets not being overly spooked. He instead ascribes last week's correction to a minor blip and is bullish on the overall sentiment.
"The Fed is clearly saying that inflation next year is going to be between 2-2.5 percent; still inflationary expectations are transitory. So, I do not read much into the statement," he explained his rationale.
"Even if there are going to be Fed increases, they are not going to be aggressive. And after the Fed statement (June 15-16 FOMC meeting), the 10-year rate is reduced from 1.6 to 1.45. So I am not so much perturbed by what has happened,” Jhunjhunwala explained further.
Juhunjhunwala also made an interesting observation about the global market impact on Dalal Street.
“We should not forget that India is in a different phase. America went through a lot of inflationary pressure from 1975 to 1985 whereas Nikkei was booming," he noted.
Bank of Japan on Friday maintained its massive stimulus to support the economy and extended a September deadline for its pandemic-relief programme, suggesting that Japan will lag well behind the United States in ending crisis-mode policies.
"In Japan, inflation had not reached 2 percent even before the pandemic. As such, we must continue with our ultra-loose monetary policy even after the pandemic subsides, in order to achieve our 2 perent inflation target," BOJ Governor Haruhiko Kuroda told a briefing after the policy decision.
"The biggest 'loose' monetary policy in the world is Japan, we do not see any inflation (there). So the Fed may be is right, this inflation is may be transitory. Therefore, whether Fed increases rates or not, there could be some short-term disruptions in the Indian market, but I believe this bull run is going to continue for a long time,” he said.