He, in fact told CNBC-TV18, in an exclusive interview that improvement in liquidity will ensure that the markets move higher. "We expect the indices to reach new highs by April-May 2011," he stated, adding that the private funding book was the lowest in two years and that outflows were seen from ETFs and arbitrage traders.
Q: What is your sense of what the market may show up this year in terms of returns for us?
A: If you see the market, which started at 6,200 at the beginning of January and last week we have touched almost 5,650, it was a similar trend which we saw in January 2010 where we started with 5,300 and by January end we closed around 4,775 or 4,800. The rest is history that the indices never come back.
Whatever way the market has behaved in this month, we already could have seen the worst. So 5,650-5,700 will be the bottom of the market and hence forward we can see the market moving into the upper decks.
Q: What about the upside because we have been making these attempts at getting to 6,000-6,200 but a lot of supply keeps coming in? By when do you think we can move passed these headwinds and form a new all time high?
A: Once we get an indication from the RBI policy whether there will be one more hike or it is done for the year which has started in March ’10. I believe in March ’11 will be the last. Once the liquidity improves, I am sure things will again come back to normal and people will start looking at the market.
Q: Would you be buying the banks now and interest rate sensitive’s after the recent correction?
A: Yes, especially ICICI Bank, State Bank of India (SBI) and some of the smaller banks like Vijaya Bank and Indian Bank.
Q: If 5,600 is to be the base for the market, what kind of anupside potential do you see for the indices?
A: If you see, most of the people in the market including some of my colleagues at work, have given up hope in the current government and our Prime Minister Manmohan Singh. I am a strong believer of him. Maybe starting from next month or in the budget, we can see some good response from the government to start the reform process and aggressive policies for the economy. If that happens, then I am sure that we will see a new high by April-May of this year.
Q: What about money though - that new high will require a lot of inflows as well which we haven’t got so far this year?
A: We have seen USD 5 billion inflows in the month of November. Fact of the matter is that was the month that saw the market peaked out and whatever the outflow we have seen in the current month, mostly out of that 50% is ETF money, which has come in the month of November has gone back.
The remaining around USD 1-1.5 billion what our arbitrage team is witnessing is that there is a reverse arbitrage in the Nifty, which started with a 40 point premium at the beginning of January. It is currently at around 2-3 point discount. The reverse arbitrage flow, which is there in the market, is showing negative numbers but these negative numbers are mostly on two issues which are ETF and the reverse arbitrage on the Nifty.
Q: What is the level of confidence now because we have had two bad corrections, one in November, one more recently; do you think it has driven away a lot of retail HNI kind of participants from the market?
A: In the second week of November when we saw the drop in the market of 400-500 points, 80% of that has gone out and the remaining in January second week when we have seen the market has gone down to 5,650. The remaining 10-15% hope which some traders were having in the market and the position, most of them have squared up.
Now people have decided to wait for some signal regarding government spending and government policies. Only then will they want to participate. If you ask any broker who is funding private books as well, their book has come down to the lowest in the last two years.
Q: When do you see that changing and what do you think is a trigger that could turn it around because as you described correctly, a lot of people don’t seem to be in a mood to be investing in the stock market, they just want to hide their money in 9.5% FD and be done with it this year?
A: If you saw in January to March 2009, when SBI is offering 10%, they saw more than Rs 15,000 crore inflows in one single year. At that time the State Bank of India stock was trading at Rs 1,100. In 18 months, when the FD matured, the SBI stock was trading at Rs 3,600. I believe that whenever people are talking on the street about the FMPs and the saving deposit rates and who is giving 11% fixed income of their money that is the time when one should look at the equity which always gives a surprising move after a year-year-and-half.
Q: Banks are the most obvious space that has corrected. What else would you be buying in the market right now, what represents value?
A: We are bullish on some of the commercial vehicle segment like Tata Motors and Eicher Motors. In the two-wheeler segment we are bullish on Bajaj Auto. After the current numbers of BHEL, which came a day before, everybody was surprised on the margin expansion. We are bullish on BHEL and some of the segments in the cement sector.
We are bullish in the cement space because till now whatever number came in the month of December, the dispatches are not showing any negative surprises. Once the government starts spending and infrastructure spending starts, I believe the cement sector in some of those companies will do extremely well.
Q: The Tata Steel FPO saw a tremendous response especially from the QIB segment. Is that likely to be the appetite you think for the follow-ons that will come next or was that Tata Steel specific?
A: After the Coal India pricing, Tata Steel has also shown that whenever you do a correct pricing and put something on the table for an investor, you will always have the best response and that is what is witnessed in the Tata Steel pricing as well. That is why the issue got subscribed 5 times. Whenever people keep something on the table, you will have a tremendous response from the investor community.
Q: You spoke about BHEL but the stocks which have been underperforming from that space are L&T and JP Associates. When do you think these stocks will start recovering?
A: More or less the price which we have seen in the second week of January, I don’t think the stock prices will go below that. Once the infrastructure spending starts, a little bit on the liquidity front when the issues will start getting resolved, those are the stocks which will outperform the market in a bigger way. For the latest updates PRESS CTR + D or visit Stock Market news Today
No comments:
Post a Comment