Indian markets not immune to emerging-market contagion: Ajay Bagga

In a chat with ET Now, market Expert Ajay Bagga shares his views on how global events could influence domestic markets. Bagga also shares his thoughts on how one should be positioned.

ET Now: What are you telling clients to do right now? There is a bit of a worry on the global front. Is this the time to book profits?

Ajay Bagga: I would not recommend booking profits because we are in a long-term bull market. The rally has paused due to international issues. Of course, some domestic political issues too added to the sentiment. But those domestic issues would have been put aside, if the international situation was better.

I would like to make three points. A rise in dollar has always wreak hacov on emerging markets — be it 1980s, 1990s, or early 2000s.

Therefore, we are going to see this problem appearing again. We are part of 'fragile five.' Though, we are lucky this time around. We have an aggressive RBI which has been maintaining rupee. Having said this, if you look at currencies of Brazil, Turkey, South Africa and Indonesia, they all are down around 17 per cent. You can really see how the issue unfolds.

India is not isolated to emerging-market contagion. One must note that we are a much deeper market than emerging market peers. Therefore, you would see FIIs generating liquidity from India, even if they are more happy with India on a long term basis.

Other than this, it seems that markets are not factoring in weak Chinese numbers. Chinese weakness is a bad news for commodities, but good news for India. Having said this, overall it leads to sluggish growth.

Therefore, if Chinese exports are up 48 per cent, it means that the US monster consumer is back. But, the Chinese imports have fallen 20 per cent. It is extremely bad news for the global economy, it does get factored in.

Another important factor would the time the world economy will take to reach where it was in 2007-2008. Those are the five big factors, I would really analyse today which will impact Indian markets more or less negatively on the balance.