Robert Higginbotham, president, European business operations of Fidelity International and responsible for retail and institutional businesses in the UK, Europe, and India, was in India this week to get a feel of the current equity market trends in the context of a volatile global financial market. In an exclusive interview with FE’s Sai Prasan, Higginbotham spoke on issues ranging from rising global oil prices and inflationary pressures to the investors’ investment strategy in a volatile financial market. Excerpts:
Oil is trading at over $140 per barrel in the global market. How do you see its impact on the global and Indian securities markets?
The market is witnessing high inflationary pressures in the short term. Central banks globally are concerned with managing inflation. But, beyond a point, they are not driving the interest rate and neither are they constraining liquidity too much. The high inflation may impact the market for the short term, but there is nothing to worry for the long-term horizon.
How long will the oil prices continue to trade high and have an impact on the market?
There is a lot of talk going around on the direction of the oil prices. People, over the last one year, have been forecasting a forward movement in oil prices. Many predicted the current oil prices. I can see a scenario where oil prices may touch $170 per barrel.
There is also a scenario that it may settle down lower. But it is difficult to predict what will happen in the long run. The market has taken the high oil prices in its stride. We believe that the fundamentals are strong.
The oil prices have been responsible for global inflationary pressures. Central banks globally have tightened monetary policy. What do you think is its impact on the market?
It is natural for central banks to tighten monetary policy in a responsible manner to contain inflationary pressures. Most central banks are concerned that they might over-tighten monetary policy. That slight caution is the right thing and ensures that the equity market may be volatile in the short run, but it is not structurally challenged. However, the overall outlook of underlying fundamentals is very strong.
The Indian market has witnessed a correction of over 30% since the beginning of the current calendar year. How long will this correction continue in view of the global market conditions?
I do not want to make forecasts for any individual market. But the world financial market will continue to be volatile for the next six to twelve months.
The Indian mutual fund industry has filed a series of red herring prospectuses to offer debt market products like fixed income schemes. Do you think that 2008 is going to be the year of debt funds?
For a section of investors this will hold true. It is a natural response for a customer to put his investments in fixed come and debt funds when the overall market is volatile. But, on the other hand, a great number of customers want to stay in the equity market, as they see these slows as a good buying opportunity.
What should the investment strategy be for Indian investors in a volatile market?
The key factor for investors is to keep their eyes open for long-term goals. If you try to time the market too accurately, history suggests that it is very hard to do.
Therefore, we suggest time in the market and not timing the market, by staying invested in the market and relying on the long-term value in the equity market, which still exists.
What are alternative investment opportunities for investors?
There are number of opportunities which investors could look at. A range of products is being offered by global market players to investors. Real estate, infrastructure, commodities, and thematic products are available to customers and these can offer reasonable returns.
Where do you see the global and Indian markets one year down the line?
We see the market more in a long-term manner, one of say three to five years instead of six months to one year.
However, surging crude oil prices, inflationary pressures, and the tightening interest rate regime will keep both the global and Indian securities market volatile for the next 12 to 15 months. However, a positive trend in the global and Indian market can be witnessed with global crude oil prices settling down.
