India’s equity markets have seen a sharp correction (Sensex down by over 1,200 points in the past three sessions) amid concerns about of the ban on ₹500, ₹1,000 currency notes.
Foreign institutional investors have pulled out nearly₹6,000 crore from India’s equity markets in the last four trading sessions, NSDL data shows. Geoffrey Dennis, head of global emerging markets strategy at UBS Investment Bank, believes the sell-off was extreme and markets will begin to settle down.
He still remains positive on India among emerging markets and feels the currency demonetisation will have long-term positive impact on the economy. Excerpts from the interview:
India has had a double whammy. We are overweight on India. The reason for that is, notwithstanding what is happening in the short-term and the risk to growth from the withdrawal of bank notes, it is still without question the best growth story in the emerging markets.
I think, the impact so far has perhaps been more disruptive than the government had anticipated. If the disruption lasts for several more weeks, you could clearly see some downside risks to economic growth numbers through weaker consumer spending.