The Russian stock market is the cheapest major market in the world and will be driven higher by disinflation, as long as oil stays above $60 a barrel, Kingsmill Bond, chief strategist at Troika Dialog, told CNBC Thursday.
"We're seeing disinflation in Russia because you have got a major fall in government expenditure … and at the same time, we no longer have spectacular growth in raw materials prices," Bond said.
"When it happens you tend to get strong outperformance by the market," he added.
- Watch the video above to see the full interview with Kingsmill Bond.
Inflation in Russia has fallen below 10 percent for the first time since the fall of the Soviet Union, Bond pointed out.
"This year we think it's going to drop to about 6 (percent), so it's a dramatic change," he added.
Russian stocks rose sharply last year as investors bet on risky assets, but in 2010 investors will have to be more selective and look for domestic companies positioned for growth, he said.
"The domestic story in Russia is indeed very strong, you just have to pick the right companies," Bond said.
But if the price of a barrel of oil falls below $60 it could mean the outlook for investing in Russia is "fragile," he said.
Many market watchers point to political problems when discussing the Russian market, but Bond thinks real progress is being made.
"There is a very clear modernization agenda pursued by the entire Russian elite from (Vladimir) Putin and (Dmitry) Medvedev down," he said.