Ask the Expert : Dry run with Abishek
Rakesh Jhunjhunwala (born 5 July 1960) is an Indian Investor and Trader. He is a qualified Chartered Accountant. He manages his own portfolio as a partner in his asset management firm, Rare Enterprises. Jhunjhunwala has been described by India Today magazine as the "pin-up boy of the current bull run" and by The Economic Times as "Pied Piper of Indian bourses".
I have with me the governor of the Reserve Bank of India, Raghuram Rajan, and I think it's useful at this point to get some more perspective on what is happening on these markets at the moment, so thank you very much for joining us here, and let me just ask you that question. Why do you think we have such volatility in markets today?
Well, I think one is jitters, everybody is looking at everybody else and saying, 'Is this the point where they take the money off the table?' because markets have moved up quite a bit. So that's part of it. Part of it is wondering what is really happening in China, why did the Renminbi start moving a little, and is there more to come? And of course the oil price, how far will it go and does it affect some entity, some lever entity somewhere, which has oil exposure, and does that create problems? So I think some jitters are really jitters about jitters, and some is really wondering about fundamentals.
Do you think the fundamentals, though, justify this decline in asset prices that we're seeing?
Broadly, no. Of course, it's hard to tell what the right level for asset prices are, but is there something that changed dramatically over the last few weeks that would say the world economy is heading downwards? I don't think so. In fact, there is a fair amount of sense that, yes, we're trudging along more slowly than we should, but it's not the abyss that we're looking at.
You talked about the concerns, or the opacity, around Chinese policy at this point. You have peer-to-peer relationships with the Chinese. Do you think we should take at face value their commitment not to devalue the Renminbi?
I think the Chinese have been saying at every forum, certainly that I have participated in, that that is not their intent. That certainly they're targeting a basket now, rather than the Dollar itself, but given that, they are not into a situation of comparative depreciation or devaluation, and they do worry about the effects of their actions on other countries, so they've made that quite clear, and I have no reason to doubt that.