The path of the coronavirus pandemic, vaccine rollout and the extent of lockdowns are the only three things that matter for the Indian equity market now, said Christopher Wood, global head of equity strategy at Jefferies. In a phone interview from London, Wood spoke to Sanam Mirchandani about why he has reduced his overweight on Indian equities among other issues. Edited excerpts:What is your view on Indian equities given the surge in Covid-19 cases?I reduced the weighting on India in the Greed and Fear note published last Thursday simply because it had become clear that the cases are rising at a very rapid rate. The only reason I reduced the overweight on India was because of the pick-up in cases, which means that the cyclical pick-up in activity has probably peaked for the moment.Do you expect a delay in economic recovery?The economy in India has already recovered but what I’m saying is the rate of recovery will now slow because of the renewed pick-up in cases. The speed of the pick-up in cases suggests more infections from new variants is affecting the data. That’s just my guess.How will foreign investors react to the risk of rising Covid-19 cases?In the short term, yes, there’s a risk of foreign selling. In the longer term this is a buying opportunity. This is purely a short-term risk. I am not expecting a national lockdown. I am not expecting a repeat of what happened last year.The only issues that matters in Indian short term is the path of the cases, vaccine rollout and the extent of lockdowns. That’s all that matters, nothing else matters. I’m hoping the government does not do another national lockdown because I think a national lockdown would be counterproductive.How much can Indian markets fall? I am not expecting a huge fall. I am expecting equities globally to keep rallying. For me, in the long term, any pullback can be a buying opportunity. At the end of the day, the vaccine exists and everyday more and more people will get the vaccine.Can the markets revisit their record highs hit in February?It is definitely possible, it depends on the course of the pandemic.What is your outlook for emerging markets versus developed markets?Every country is different. The key point is the vaccine rollout. The vaccine rollout is much more advanced in the US in the UK than in a country like India. I am still long-term constructive on emerging markets. The market will be focused both on the risk of localised lockdowns and vaccine rollouts. The good news is India makes the vaccine; but the question is do people want to take the vaccine? I would expect growing focus on the part of the government in India on vaccine rollouts. My portfolio is a long-term portfolio. So I’m not making a big change.Investors are cutting bearish bets on the dollar. Will this be permanent?For the long term, I remain dollar bearish; but in the short term, the dollar can rally more because the US economic recovery is much stronger than in Europe and the vaccine rollout is much more advanced in the US than in Europe. In the long run, I am bearish on the dollar, but in the short term it can remain in rally mode.Do you expect US bond yields to touch 2% soon?It (2% mark) is entirely possible. My basic view is that bond yields are heading higher unless the Federal Reserve decides to try and cap them by doing yield curve control. The key question for the markets in the next few months is will the Federal Reserve try and cap rising bond yields by implementing yield curve control. If the US Federal Reserve allows bond yields to rise, then the dollar will remain stronger. If they try to impose yield curve control in the US that will be dollar bearish.

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