In an effort to provide you with a consistent edge over other investors, we will periodically interview thought leaders and top investors covering the Indian equity market. We begin our inaugural interview series with Bobby Rakhit, the CEO of Inside Consulting.
(Interviewed by Ankur Shah, CEO, Value Investing India Report on May 1st, 2012)
Ankur: With Spain back in recession after reporting that 1Q12 GDP declined by (0.3%) on a q-o-q basis, do you think global markets are at risk for a correction?
Bobby: It’s a murky picture right now. I was already bearish prior to Spain’s GDP numbers. Spain is one of those economies where we are seeing a lot of bad macroeconomic data. The unemployment rates are hovering around 18-19%. It really concerns me that we have governments implementing austerity measures when unemployment is so high. I think Spain and the periphery of Europe will be a drag on overall market performance.
Ankur: Recent data out of the US seems to confirm that the economy is not really recovering and is actually stalling. 1Q12 GDP growth came in at 2.2%, which confirms in my mind that we’re experiencing a very weak recovery. What is your view on the direction of US equity markets?
Bobby: We are seeing a little bit of weakness in job data and that data next week is going to be very vital. If you look at the US markets in general the reason why they are up is because some of the earnings have been fantastic. Three quarters of earnings results have been positive but I think market direction will be determined by the jobs outlook in the US. With the weakness in Europe, I think markets will generally be directionless. I think the only positive catalyst is individual company earnings, which continue to remain positive.
Ankur: What should my readers be looking for in terms of key catalysts for the direction of global markets in the short-term?
Bobby: I think over the next three months, Italy is going to be very important. I would watch spreads on Italian government debt. If the contagion in Europe spreads to Italy then I think we’ll be facing a very negative market environment.
Ankur: Given your global outlook, what does this mean for the Indian equity market?
Bobby: I think India has gotten hammered recently due to short-term swings in FDI. As foreign investors become concerned about problems in Europe you tend to see indiscriminate selling. In the short-term, the Indian markets will be driven by foreign fund flows but I think longer-term the Indian market will be an excellent place to invest due to attractive demographics and growth potential.
Ankur: Are there any sectors or segments that look particularly interesting at this point?
Bobby: I think the smart money will be focusing on the small and mid-cap space in India. There are a number of great companies that have excellent management teams and are attractively valued.
Ankur: I completely agree with you. I’m going to be spending a lot of time ripping apart financial statements to uncover a few undervalued gems in the small and mid-cap space in India and will make these investment ideas available to my paid subscribers. I think that the situation in Europe is worsening and that the US is on the cusp of another slowdown. As a result, we could get a broad global market sell-off. I think patient investors in the Indian market will be able to pick up great businesses at excellent valuation levels, if we get a correction in the near-term. Finally, thanks for your time and we hope to speak with you again in the near future.
Bobby: Thanks and it’s always a pleasure.
Bobby Rakhit, Founder & CEO Inside Consulting
Bobby Rakhit is an extremely successful sales person and investment banker who has now turned his attention to building a successful consulting practice for the investment community in the MENA region. With over 18 years of experience he has built a network of over 5000 investment professionals across the European, Middle East, African and Asian markets.
Most recently Bobby was with FactSet, a premier provider of global financial solutions, and was Managing Director for the Middle East, Asian and African markets. In the span of 9 years he bought in over 250 new clients generating more than $30 million of business. His role encompassed developing systematic investment processes for both the investment management and investment banking communities. Prior to FactSet, Bobby held positions in investment banking for HSBC, U.S. Bancorp Piper Jaffray and Morgan Stanley.
Bobby is a CFA charterholder, graduate of McGill University and holds an MBA in Finance. He is a regular guest on CNBC, NDTV Profit, Al Jazeera and Bloomberg TV. In addition he is a guest lecturer in a number of universities, guest speaker at key conferences and an active board member of several technology and real estate companies.
Bobby is also an author and recently published 30 Minutes to Sales Greatness. You can purchase his book on Amazon by clicking here.