The Hindu Business Line : `Economy will witness fractional slowdown'

He was speaking at the Annual General Meeting of the International Swaps and Derivatives Association, held in Singapore. According to him, while India saw a growth of 8 per cent last year, this year it was 7-7.5 per cent and in 2007 it is likely to be 7 per cent.

The country-outlook for India is weaker industrial production in 2007, he said. There is likely to be tightening of the monetary policy by the Reserve Bank of India, because of rising inflation and increasing credit growth.

Tracking US Fed

"India would see one or two more rate hikes, as the RBI follows the US Federal Reserve and the US Fed has indicated one or two more hikes," he said.

Even Japan is seen moving away from zero interest rate to normal monetary policy, he said. As the European Central Bank too would raise rates, this could cause a slowdown in flow of foreign funds to India.

"The weaker inflows would also put pressure on the Indian currency, which would depreciate," he said. The Indian rupee is currently overvalued between 5 and 7 per cent, he said.

Asian equity markets

About the Asian equity markets, Mr Spencer said, "We are about two to three months away from the peak of Asian equities, after which we could see a decline. The valuations are stretched and due for correction."

There could be a 5 per cent correction in all Asian equity markets, he said.

Therefore, it would be prudent to invest in India and other Asian markets in the second half of next year, he said.