New York,  India's financial market faces low downside risk from coronavirus' impact on supply chains, will instead continue trading on domestic triggers and the current global health scare represents a "buying opportunity", according to Luis Oganes, JP Morgan's head of currencies, commodities, and emerging market research.

"I would say that the things to watch are the turning point in the coronavirus episode, I think that it can lead to a big rebound in emerging market equities," Luis Oganes told IANS in New York. 

Oganes is predicting that the next few months are going to be "very interesting" for markets and recommending investors turn to local currency bonds. Emerging market central banks may cut interest rates further and the dollar will remain strong, he said.

Asked how the cocktail of downgrades, coronavirus and supply chain disruption affects the India story, he said, "If anything, there's something positive coming from lower oil prices, which India imports."

"I would say that the economic link between India and China is still rather modest. So when we talk about the beta of growth - if China's growth declines by half a point or one full point, how much that affects other parts of the world, India is not topping the charts in terms of that beta," he said.

According to Oganes, India won't be the biggest "casualty" of coronavirus' impact on markets. "Even before this episode, there's been a deceleration threatening the Indian economy, but this has nothing to do with coronavirus," he said. 

Responding to a question on possible relocation of supply chains outside China, the JP Morgan view is that it's logical in theory but the ground reality is that China's scale is hard to replicate anywhere else in the neighbourhood. Therefore, companies may choose to take the hard knocks and stay put. 

Oganes said that many of JP Morgan's clients who already have a "huge manufacturing presence in China" say that scale of production cannot be easily replicated in other countries without "massive investments" of time and money. 

"They don't have the skill set, they don't have the resources, the manpower, basically the scale to replace", Oganes said referring to alternative locations.

JP Morgan has been forced to downgrade emerging market growth a couple of times already since the coronavirus outbreak began in December 2019, with the latest downgrade coming this month.

"We started this year thinking that emerging market growth was going to rebound to 4.9 percent. We have trimmed that forecast; we're now at 3.8, so it's like 30 basis points below what we were expecting. Still modest", Oganes said. 

The emerging markets research team at the bank thinks a eV' shaped recovery is imminent, where the entire coronavirus hit happens in the first quarter and the recovery begins in the second quarter of 2020. 

"Maybe instead of a V-shape recovery, it's a U-shape recovery, meaning that the recovery comes only in the third quarter. I can tell you that chances are we are going to be forced to do further downgrades", Oganes said. 

Like other health scares before this, the coronavirus induced lull is a "buying" opportunity, "because eventually the economies do recover, and markets do recover."

Although investors remain nervy about worst case scenarios, Oganes says "no one wants to be making a huge bet against the market or getting overly negative." JP Morgan research suggests that's why there's not been a "massive correction" despite volatility in emerging markets.

Looking ahead, Oganes said that any clear headline around diminishing contagion rate or a coronavirus vaccine could launch the markets into a massive market rally and "people know you don't want to be caught short".