Q: Do you think the global economy is heading for a recession?
A: BoFA-ML fund manager survey revealed that 34 percent of them expect a recession in 12 months, the highest since 2011. This is not surprising, given that the US yield curve has inverted recently.
Q: With global recession looming large, gold is all set to clock Mount 40K on MCX. Do you think it is the right time to invest in gold or gold ETF?
A: Due to fear of a global recession, uncertainty on account of trade wars and expectations of weak monetary policy, gold is likely to do well and we recommend investors should invest in gold.
Q: The inversion of US Yield curve triggered risk-off sentiment among the global investor community. How are things looking for Indian markets?
A: The Indian market faces its own set of challenges, largely the downturn in the economy resulting in poor corporate earnings.
We believe that the economy is likely to bottom in Q2FY20 and recover from that point. Government stimulus can make the recovery stronger.
Q: How did India Inc. fare in the June quarter earnings?
A: Earning for the quarter that just ended fell 10.8 percent, making it the worst quarter in the last two years. Also, while the weakness was well anticipated, earnings were below consensus by close to 5 percent.
The weakness was largely led by autos and metals whereas banks and select consumer companies did well.
The September quarter is likely to be a bit better. Firstly, earnings downgrades mean expectations will be lower, secondly the economy is likely to stabilize in Q2FY20, and lastly, the lagged impact of commodity prices will be a tailwind for earnings.
Overall, we expect flattish growth in earnings in Q2FY20.