In an interview to CNBC-TV18, Shankar Sharma, vice-chairman & joint MD at First Global believes that emerging markets are headed into a very strong return environment and India within that space looks very good.
He said, "If you look at the rally from 27,000 Sensex in March 2020, from there it is ferocious. However on full year basis of 2020, India was up around 12 percent. So the pace of the rally is still not ferocious, it might get more ferocious."
Sharma said, "90s was a lost decade for India in terms of the overall index. Around the Harshad Mehta bull market it 4600 on the Sensex, but the market did not cross it till 1999 which is a good 7 years later when the tech boom happened. However the tech boom was a very tiny boom, the rest of the real economy was hurting. From there till 2003, emerging markets and India went through a terrible phase. There were no returns available. Then the dot com crash happened."
"From 2003-2004 the revival began but the revival was interesting. The US markets did not revive. As a result of FEDs massive easing to help stave off the aftermath of dot com crash, they eased a lot and that crushed the dollar and money started to flow out of dollar assets and into non-dollar assets which was commodities and emerging markets and everything then began a massive bull market. That is exactly what in a way we are experiencing now. In the big aftermath of the COVID crisis the FED has loosened purse strings, they have flooded the market with money and that is leading to a debasement of the US dollar. So, similar to 2003, now the US trade deficit, US budget deficit combines 20 percent. With that the pressure on the US dollar has become tremendous and that is why you are seeing the US dollar index which was around 101 fall to 88-90. So similar to 2003-2004, money is coming out of US dollar and moving into emerging market equities and commodities", he said.Watch video for more.