European stocks continue to drop after credit rating agency Moody’s downgraded the sovereign ratings of six eurozone countries. Moreover, persisting doubts over Greece‘s sincerity to implement austerity measures has dampened investor sentiment further.
Jerome Booth, head of research at Ashmore Investment, suggests that the most crucial thing for European Union is to avoid contagion from a Greek default. He said the key to save Europe lies with regaining investor confidence in sovereign bonds. ” If that happens, then we can see a recovery and that could include additional measures to deliver,” Booth told CNBC-TV18 in an interview.
However, he adds that as issues in the US and the UK market may take longer to resolve, India should utilise this volatility to the fullest. Any volatility is a good time to buy because emerging market equities still offer a good value.
European Union should avoid contagion from a Greek default. Reuters
Booth says, equities here ( India) are at a premium to other EMs. “I think the central bank has been a bit timid in using its quite huge reserves to combat inflation. I think an obvious thing to do is to let the currency appreciate. I don’t believe the RBI needs the reserves that they have. They are excessively large, but we will have to see how that works out,” he told CNBC-TV18.
Watch the full report on CNBC TV 18