You have read the news, hopefully a ceasefire?
Anurag Singh: Yes.
24 hours ago it was all missiles here and there. Now it is a ceasefire. And 24 hours later, what will happen we do not know.
Anurag Singh: Well, I would say look at the refreshing change from what we had last four years with Biden and the current administration. They were very decisive. I liked the way Wall Street Journal puts it. They said Trump meets the moment, that is the editorial, which is that, they made a point that look at the last four presidents they had, they knew Iran is doing something, they did not bite the bullet and here comes one president who said okay, now we need to stop this because nuclear proliferation cannot happen. So, overall, I like the bold move. I also like the general assessment in US which was that Iran would like to buy time. They do not have the capability at this point in time which is exactly what they have done. I was listening to your view, they are so apt, which is that the world is now more peaceful and more safer place and it is more peaceful and safer place with Iran not having nuclear weapons. So, I will take all the positive that comes with this which is that a clear message to the world, no nuclear weapons by any other new country and then the business goes on. So, I would say all positive. I am more confident that it will turn out to be a decisive moment in history and in time so that is how I see it.So, what should one do, long crude, short crude? You go long, then a ceasefire fire. You go short, no ceasefire.
Anurag Singh: Yes, so crude has not turned out to be a good trade. With Trump with a drill baby drill, it is not turning out to be a very good trade for the oil companies because the crude prices are constantly getting capped. So, I think that is the view. All of these, even Buffett build up this good stake into some of these oil companies, but they have not really turned out to be very good trade. Look, with tariffs, low energy and low regulation and low taxes are the other three benchmarks of this government.
So, low energy cost is a primary pillar and as long as that stays, which means oil and crude and everything will be contained, so that is not good. But if the oil is cheaper, everything else is good. Businesses do good. Inflation is low and it is very good for emerging markets too, especially India. So, that is the positive that comes out of it.
But the other thing that is surprising to see is the movement in the gold as well as the dollar index. Help us understand that what is your take on the dollar index movement and what is keeping this particular index below that 100 mark despite the fact that we have seen so much happening at the warfront and along with that gold prices they did not shot up as much as that was anticipated. The safe heaven buying was not there. Give us your view there.
Anurag Singh: So, let us kill the gold first, that is easier one. We spoke about a year back, everybody knows that, that is an open secret, central banks have been buying 20% of the new gold supply in the market plus Chinese with the property market tanking, they have been buying gold as well.
So, there was a spurt. But, however, I think that has kind of hit a ceiling. It is no longer an alternative to the dollar. So, of course, I mean there is a limit to what gold can achieve. The dollar index is more interesting and I would say that is a bit of a self-goal by the current administration.
So, look with tariffs, they thought more money will flow into US and so dollar should get stronger, so it can buy cheaper goods from other countries, so that was the whole idea that if you put a tariff because the dollar is stronger half of it will be taken up by the strong dollar and the half of it be taken up by the low margins by the exporters. Now, the reverse has happened, so that is a bit of a self-goal. And I think that is where the administration also has realised that.
I mean, many people would say they were trying to weaken the dollar. I do not think that was the idea. It was too expensive but I do not think they were trying to get it below 100 because then the imports become even more expensive for us.
So, it is a difficult spot. But all I would say is 56% to 57% of dollar is euro basically and the euro has gone up proportionately, so that should also balance out.
I do not see any reason why Europe becomes suddenly a good safe haven for the investors. It is not really. By the way one more thing, it is interesting, China continues to dump the long-term treasury bonds. It is raising the yields but at some point, it is putting pressure on dollar because there are outflows happening, but then the higher yield should also help bring in more money. But currently because China was dumping, Japan was dumping that might be a reason dollar is low. We can only make a conjecture, I do not have any firm view after this, but, of course, we want a higher dollar that is my sense the administration also wants this.
What do you think is next or what lies ahead for the global markets as well as markets back home? Do you believe this is the peak of bad news that we have come out of but now with the ceasefire announcement, do you also believe that this is the peak of good news we are going to get and how do you think the markets are going to price this in?
Anurag Singh: So, I have always maintained this firm view that we have to watch 10-year yield. It is at 4.35 now. And with the pressure now mounting upon chair Powell that look you are holding up the rates at high level for too long. I understand these are two Republican leaning governors, but the pressure is mounting up. So, once the 10-year yield drops below four, there are signals that we might be 50 to 75 basis point higher than usual, the normal 10-year yield levels, so the FOMC should lower rates, that should be good for emerging markets especially India. Money going out should stop, rather should start getting in, but once the 10-year yield goes below 4.35 and I think by end of the year we should get there. Global markets look good.
The market is looking good for a rally. I mean there was a dip and almost not a dip, it was quickly bought into. Even now there are very deep cheap pockets within US market outside the big tech, so that is the view here.
India looks good. I have turned positive on India. I mean, of course, there are no big bargains, but you can safely get 10-12% return that is not bad in today’s environment, where in the world can you get that, so there are only limited places so that is my take on India, that is a high level view how I see it.
