Jim O?Neill, head of Global Economic Research at Goldman Sachs, better known as the person who coined the ?BRIC? as a term, reckons that the India growth story is strong and the country will command an extremely strong position if its productivity potential is unleashed. However, he advises investors to look at companies listed in European and US markets with strong India operations, rather than investing in India directly.
?At the moment, Indian the India trades at 16 times its one year forward earnings, and there are other markets that trade at lower multiples. So overseas investors could get exposure to India?s growth potential at lower valuations in these markets,? is O?Neill?s reasoning. He also reckons that there are several other institutions that have a strong earnings outlook on India?s companies and therefore the current multiple of 16 times one year forward earnings could also look attractive.
Speaking to select media gathering, O?Neill believes that this time around the Federal Reserve?s rate cut could well be the last one. ?The Fed will pause and take a look at other development,? he added. O?Neill rubbished the notion that interest rate differentials could be the cause of money flowing into India. ?Rates have gone up and down over the years, and this has not influenced money flows at all,? he added. ?A lot of institutions use this belief, but over the years, it is the country?s earning potential that decides the extent of fund flows,? he asserted.
O?Neill believes that there are substantial funds in the middle-east region that will be flowing into emerging markets, and even India. ?And they have no linkages with the US interest rates,? he adds.
O?Neill believes that the dollar weakness will actually help the US as exports have started rising faster than non-oil imports and the US could well have a current account deficit of 3% to the GDP and this will make it stronger and also the global economy.
