ET NowIn an interview with ET Now, Neeraj Gambhir, MD & Head - Fixed Income India, Nomura Capital India, shares his views on markets. Excerpts:
ET Now: How do you think the market should approach the Fed meet tonight?
Neeraj Gambhir: I am not sure if this is going to be a very big event for the market. The expectations are that the Fed will continue to say the same set of things that have been said in the recent past. They are prepared to do at least one rate hike during the course of this year. I do not think that the Fed will give us any clarity as to whether that rate hike could come in September or in December. A lot depends upon how the data plays out between now and the next FOMC policy in September. So, I do feel that this particular Fed meeting is not such a critical event for markets.
ET Now: If indeed money that was supposed to come in via divestment and a few other processes does trickle down slightly or largely as the case may be, do you think the fiscal math will change for the end of the year?
Neeraj Gambhir: There are differing forces on the fiscal maths. There is obviously a betterment on the indirect taxes but there was also the news that the government may not be collecting as much dividends from the state run banks, effectively leaving that capital there within the banking system.
Eventually, whatever be the forecast on divestment, there will be variations in the realisation of this forecast. My belief at this moment is whatever those variations are, the government is still committed to maintaining its fiscal deficit targets as it was read out in the budget. So, if for example, the receipts are lower, this will have to be countered with a reduction in the expenditure where that reduction is in a capital expenditure or current expenditure. It depends on how much flexibility the government has in all likelihood. The capital expenditure will be the one which will face the brunt.
Effectively, these are not necessarily impressive soundbytes as far as the fiscal math is concerned but reality is that we are still hoping that the government will stick to its fiscal deficit targets and if the receipts are lower, the expenditure will have to be adjusted accordingly.
ET Now: How do you think the market should approach the Fed meet tonight?
Neeraj Gambhir: I am not sure if this is going to be a very big event for the market. The expectations are that the Fed will continue to say the same set of things that have been said in the recent past. They are prepared to do at least one rate hike during the course of this year. I do not think that the Fed will give us any clarity as to whether that rate hike could come in September or in December. A lot depends upon how the data plays out between now and the next FOMC policy in September. So, I do feel that this particular Fed meeting is not such a critical event for markets.
ET Now: If indeed money that was supposed to come in via divestment and a few other processes does trickle down slightly or largely as the case may be, do you think the fiscal math will change for the end of the year?
Neeraj Gambhir: There are differing forces on the fiscal maths. There is obviously a betterment on the indirect taxes but there was also the news that the government may not be collecting as much dividends from the state run banks, effectively leaving that capital there within the banking system.
Eventually, whatever be the forecast on divestment, there will be variations in the realisation of this forecast. My belief at this moment is whatever those variations are, the government is still committed to maintaining its fiscal deficit targets as it was read out in the budget. So, if for example, the receipts are lower, this will have to be countered with a reduction in the expenditure where that reduction is in a capital expenditure or current expenditure. It depends on how much flexibility the government has in all likelihood. The capital expenditure will be the one which will face the brunt.
Effectively, these are not necessarily impressive soundbytes as far as the fiscal math is concerned but reality is that we are still hoping that the government will stick to its fiscal deficit targets and if the receipts are lower, the expenditure will have to be adjusted accordingly.
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