Excerpts from CNBC-TV18’s exclusive interview with PN Vijay:

Q: What do you expect from Dr Reddy today and how do you expect the markets will take it?

A: Dr Reddy has got a thankless job on his hands, one side he is facing more than 7% inflation and other side he will be hated by everyone if he brings down the growthrate. I think he has done a lot already by increasing the CRR so he may talk a lot, he maybe hawkish. There is enough liquidity in the system. So there is an off chance he may increase the reverse repo. But other than that I think it is common knowledge that this inflation is driven by high supply commodity prices. So monetary tightening cannot do much to control inflation at this point in time in India. So I think he will be very hawkish, he will talk a lot but he may do little.

Q: Markets has come a long way as well, made that long journey back to 17,000 if there is a very hawkish tone coming out from the policy and there is some kind of rate action as well, how much damage do you think it can do to this uprun we have had in the past seven-ten days?

A: No damage at all, I think it will be just passed away. I do not think we are a stock market that listens so much to the Indian Fed. I really feel that we overdid the correction, the first three months. I have always been saying right from the beginning of April that the bull market should resume as inflation slowly subsides. I stick to that view whatever the Fed says, whatever Reddy says I think over the next three months period the market which has already gone up about 4% in April so far, should climb higher. I have no doubt in my mind and because of domestic demand the last ten days alone; in Punjab government has released something like 20,000 crore for the farmers between the State and the Central government -  India is not going to import any food this year. So there is strong demand, which is developing  as you can see from the figures of Hindustan Lever and Hero Honda, which really mimic the rural economy. So I think that we are definitely not in a recession and I think at some stage the market should react favourably to these macrodevelopments in India.

Q: How would you position yourself in the rate sensitive sectors now, given what is going on in inflation and your policy expectations banks and real estate primarily?

A: They have got hit a lot. But I do not know whether I would jump in and buy real estate stocks - probably auto stocks is different. I think we are at the bottom of the rate negativism; Maruti should be going up from these types of levels. So if I were to go into rate sensitives, I will play a bit safer and move to high quality rate sensitives like auto.

Real estate will have its day; it has been beaten down and out for too long. 

Disclosures:

It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.