Monday, November 12, 2012

Sensex may not cross 21000 levels anytime soon: Marc Faber - EconomicTimes

Edited excerpts from The Economic Times Now interview with Marc Faber, Editor & Publisher of The Gloom, Boom and Doom Report, for his take on the global and Indian markets. Marc says that there can be a year-end rally, but he does not see new highs in the markets.

ET Now: Do we brace ourselves for a year-end rally or a year-end fall, given the risk from a fiscal cliff in the US?

Marc Faber: We have peaked out recently a couple of weeks ago and we are in a downtrend. Eventually, the markets will be down 20%, but will be oversold in about 10 days' time to two weeks' time. So there can be a year-end rally, but certainly no new highs in the markets.


ET Now: How real is the possibility of a Euro break-up considering that Spain and Greece are still looking as vulnerable as before?

Marc Faber: Yes, it is a possibility. I do not think it will happen right away because the politicians want to keep the Eurozone intact, but the situation in Portugal, Greece, Spain, Italy and even France is actually unsustainable in the long run because of the unfunded liabilities. So a Euro break up will probably happen sometime in future, but not for another three or five years.



ET Now: Has your stance changed on India because of the slew of reforms that we have seen and do you see the recent announcements call for a rerating of the region?

Marc Faber: Not necessarily. While the government has announced some reforms, there is a huge execution risk in India. A lot of implementation is still to happen, and it will be interesting to see as to what extent they will be implemented and their actual impact on the economy. At present, there is high level of economic activity in India as well as China and Southeast Asia, but India is not growing anymore. Hence, I will take a relatively cautious stance towards the Asian markets.



ET Now: How do you see emerging markets manage the inflation versus growth equation?

Marc Faber: Like in Western countries, Asian central banks will also ease over time and they have done that already in some countries. There are not many countries in the region that are as disciplined as Singapore. I believe that even though there will be some inflationary pressure, but because of the overall weakness in the global economy the energy prices will come down somewhat. Moreover, food prices are already somewhat down after having risen so much, and are currently not as high as they were a few years ago.



ET Now: What do you see in terms of the returns on Indian equities over the next one or two years? Should investors adjust their return expectations?

Marc Faber: I am not exactly a prophet, but we have rallied strongly from the 2009 lows and the outlook for large capital gains at this level is very limited. The high in 2008 and the high last year was around 21000. I do not think we are going above 21000. I would rather expect the market to ease again from here.



ET Now: What regions are you seeing as the most and least attractive for investment right now?

Marc Faber: The Chinese economy is slowing down rapidly. In my opinion, it is not growing at any more than 4% now. The market was at 6000 in 2007, and today we are down to around 2000. Clearly, the market has already discounted a lot of bad news and if a junk country like Greece could rally from the lows of 65%, we can expect a trading rally in China of 20%-30% over the next four or five months. Additionally, the Japanese Yen has begun to weaken and that should be a positive trigger for Japanese equities.