Manish Chokhani, MD of Enam Financial said the correction has given a long-term investment opportunity.
He rubbishes the possibility of a bear market, because, he said, credit has to become extremely tight in a bear market, which is not likely in India.
As of now, he said, "We remain in a corrective phase in the bull market."
The steep fall is due to the leveraged investor, he said. USD 12 billion of Reliance Power IPO QIB money will come back to the markets, he expects.
Excerpts from CNBC-TV18's exclusive interview with Manish Chokhani:
Q: How high are the chances of bear market in 2008 now?
A: The word bear market is used very frequently on your channel by a number of people and I would like people to step back and think - to fulfil necessary conditions in a bear market, credit has to become extremely tight, money has to become extremely tight and one cannot make that case in India with the way our currency reserves are and with the way RBI has managed the liquidity position here. We are heading for a series of rate cuts because liquidity remains high in India.
Bear markets typically come about when one cannot get money for the love of God; that’s not likely in India et al. So we remain in a bull market; we remain in a corrective phase in a bull market. One would have had three sources of potential supply to the market; one was the prop books, IPO and the leverage positions and all three have coincided fabulously in January to give what I think is a great buying opportunity to investors.
Q: Are you surprised that the decline or the downward move has always been led by emerging markets?
A: I think I said it very candidly; I was surprised with the speed of the rise and the extent of the rise and I am equally surprised by the speed and the sharpness of the fall. Typically, these are caused by leverage positions because it's the marginal retail buyer who buys it 10-20% up and it's the leveraged speculator in the market who is forced to sell it down 10-30%. No ration investor or no fund or no industrialist goes and sells or buys his stake in that kind of a radical manner.
Q: What lies ahead in 2008 once you look at the global situation? How do you see the next eight-ten months panning out given where we are today?
A: It's consistent with the whole cycle theory I've had that if the US is going to die and the response to that will be, they will pump more and more steroids into the system, the move of Fed yesterday, of cutting 75 bps at one end, made people panic, that is it really worse than what we thought.
Why the Fed is behaving in such a knee jerk fashion? What it does is create a lot of liquidity back in the system and lower cost of borrowing for people and throttle markets and global economies if the cost of credit is too high and money just isn’t circulating.
So if that money supply is created, once people's nerves have calmed down they look around and say, “now we have got all this money where do we go.” There is no point being in the US because if one is staring into a recession and at the margins, one may buy few stocks here and play a bounce, but if there is probably 12-18 months of pain the US, let's look for the best performing asset classes. By definition, it's going to end-up back in hard assets because the financial sector in the US has destroyed confidence in the banking system whether its Citi, Merrill, UBS, JP Morgan, whoever they all had such severe crises there that the average bloke on the street is going to say, “I am much better off holding hard assets; I will hold property maybe not in US but elsewhere in the world, I will hold commodities, resources, oil, gold and emerging markets which is where the growth is.”
I would think it will take three-four months for people to get their nerves back in order before they come back in a significant way overseas and put money back to work in these markets, which are the only places where one is going to get growth.
More to come...
No comments:
Post a Comment