The role of Politics in determining the direction and pace of economic growth cannot be ruled out. It has played a critical role in the present turmoil that the Indian economy and the market are fighting against, reckons Maarten-Jan Bakkum, global energy market strategist at ING Investment Management, Amsterdam.
In this moment of crisis, Latin America could provide solace for Indian investors. Populist political measures adopted by the government ahead of the general elections in 2009 and globally high-energy prices are responsible for the inflationary pressures leading to the volatile equity market, believes Bakkum.
Speaking exclusively with FE, Bakkum stated, ?The subsidy in the Budget and the political landscape ahead of the general election are responsible for this. There is not much room politically to act in the present situation.? ?High oil prices create pressures on the fiscal deficit, balance of payment and inflation, which is presently at 8.75%, and interest rates. The Indian market has always been sensitive to high oil prices,? Bakkum said.
Bakkum, like others, does believe in the long-term attractiveness of the Indian market. There is risk building up in the short run, and this was not present in the earlier years. The main threat is the energy crisis and this is making the Asian markets, including India, weak, he adds.
Given this situation, Bakkum has been recommending Indian investors to diversify their portfolios and look overseas. He clearly indicated towards Latin America as it may provide better returns, given the weak trend of the Indian currency. He said, ?The Indian currency may appreciate in the longer term, but it has weakened in the recent past and the risk on the currency has been enhanced.?
A large number of global fund houses have a Latin America fund and ING Investment Management will also be introducing it in India this month. ?We will offer a number of global products in India in the next quarter,? said Bakkum.