India likely to see Santa rally which may taper off by Fed-end: Ajay Bagga

economictimes.indiatimes.com:

There is a strong possibility that you get a kind of a Santa Claus rally, even in the Indian markets and then it tapers off by Feb-end as the elections are announced, says Ajay Bagga, Market Expert. Edited excerpts.

How do you see India placed at this point in time as there are a couple of triggers ahead for us, especially the election? With respect to the global setup, China specifically, given the mysterious pneumonia outbreak, do you believe that it could be a concern for India as well? We are a neighbouring country. What is the growth outlook for China that you are holding at this point?
China can slow down further from this year.

We are expecting about 3.8%-3.9% GDP growth next year for China. The property sector issue is still huge. Yesterday, the government came out with a very delayed plan.

They are again depending on the banks to shore up the property sector which would not work out. The banks have their own issues and for banks to do unsecured lending to a troubled property sector is really pushing all walls of credibility. Of course, these are state-owned banks.

Once the orders come in, some amount of cosmetic lending will happen. But the markets became sceptical within a day. So Friday, we saw some selling in the Chinese property sector as well, and the indices were also soft.

Overall, will India benefit? Yes, we have seen some flows. But what happens is the strong dollar, the Fed peak, normally we see that emerging market outflows, turn into inflows. So India should be a beneficiary.

We have not seen that in the last three months; we have lost $4 billion in terms of FII outflows. We see that continuing through May because of the national elections.

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