Excerpts from CNBC-TV18’s exclusive interview with Sudeep Bandyopadhyay:
Q: How much more upside do you expect to this market having pulled back to 18,800?
A: Our view is that market is going to see lot of upside in the month of February; worst, to a great extent, is behind us. There is lot of liquidity which is coming back into the market; the interest rate scenario looks pretty good. As we stand today here, with the interest rate differential between US and India increasing, we feel that there has to be some interest rate correction in the short to medium-term; unless there is major adverse event in global markets - I don’t think there will be anything major in Indian market which would be adverse. We will take cues from the Budget expectations and the Budget during this month.
Q: Do you think sometime in the next couple of months there is a chance that the market recovers all its lost ground and forms a new high or is that too optimistic?
A: One thing we have been witnessing at the retail end of the market is that there has been a huge interest of the retail investors in the capital markets which is unforeseen in the recent past and say, in the last 15-20 years. This time when the market crashed as opposed to earlier, when there used to be panic amongst retail investors, people were calling us - both retail and HNIs to check what to buy, when to buy - whether to put all their residual cash in the markets straightaway? I think this was a great positive signal and we are happy to see this happening.
The maturity of the retail investor is what we were lacking in the market - that is coming to an extent. If one looks at the recently concluded Reliance Power IPO, 50 lakh applications were received - this is unprecedented. Forget everything else; just the sheer number of people applying for an IPO interested in equity- it’s amazing! We should see good things in Indian market – it’s a good sign. The impact of the FIIs coming in and going out to a great extent can get neutralised if retail participates in the Indian capital markets in a big way.
Q: What is the call that you have taken on some of these leadership sectors like power and infrastructure. Have you used the market dip to increase exposure there or are you avoiding it right now?
A: We are continuously advising our investors that Indian market in the medium to long-term continues to look very good; no fundamentals have changed and sectors like infrastructure, power, telecom, capital goods, education - continue to look very good. I think anybody having little longer-term outlook; they should come into the market and remain invested – nothing has changed. Clearly Indian markets will give 15-20% YoY returns during the next five-ten years.
Q: I believe you are expecting a bit of nervousness, though closer to the Budget. So what kind of range do you see market holding for itself in February?
A: I don’t think we will see major correction or downward movement of the Index in February as one would know that the Budget would come towards the last Thursday of the month; which also happens to be the settlement day. So we will probably witness lot of volatility during that particular week. But other than that, I don’t see a downward trend at this point of time; unless there are some major global adverse negative factors.
Q: What about trading volumes they have dipped alarmingly over the last few days. By when do you see confidence coming back and trading volumes improving?
A: I think you will start seeing the trading volumes picking up from today. I think it was a factor of liquidity getting drained out to a great extent which is coming back to the market as we talk now. I think today onwards one will see the volumes moving up.
Q: Any sense of whether the same sectors will lead this time or are people looking to buy some of the underperforming sectors of 2007 now?
A: There is a view that sectors like IT, pharma, textile and things like that may start picking up. But we don’t strongly subscribe to that view. We continue to remain bullish on the sectors where the economy has laid lot of stress and we definitely see lot of activity going forward. Infrastructure will continue to remain the pivot around which the Indian economy will move during the next five-ten years; we are very bullish on that.
IT and lot of other sectors which are dependent heavily on exports; to the dollar economies, will to a great extent, be dependent on how the dollar moves unless they are able to diversify significantly - trends for which are not evident at this point of time.
Pharma, I would tend to think that will continue to remain volatile; I don’t think there would be a big rally in the pharma at this point of time.
Q: While you haven’t seen any redemption yet, are you seeing more capital or fresh capital being allocated by investors as well?
A: Definitely. I do see fresh capital getting allocated. If one looks at the recently concluded IPOs - the amount of money people had put in the market or wanted to put in the market which they will get as refund, is allocated for equity markets - we expect at least a significant portion of that to come back to the markets as investments.
Disclosure:
It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.
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