Hold cash, buy stocks not sectors: Kotak Mahindra Cap

Shanti Ekambaram, Director, Kotak Mahindra Capital, said investors should hold cash and wait on the sidelines. "One would get opportunities. It gets more stock specific now, rather than sector specific. Valuations of some stocks are looking attractive. Investors may adopt a cheery-picking strategy once a little bit of clarity emerges. Right now, most people are just waiting and watching. There is a lot of cash on the sidelines."  

Excerpts from CNBC-TV18's exclusive interview with Shanti Ekambaram:

Q: How bleak are the markets looking? Are we in for a long dry phase?

A: It is difficult to say. Right now, sentiment in the market is low because there is really no direction. Global cues are looking weak. Oil trading above USD 140 per barrel is neither great news for global economies, nor India. Credit markets in the US are likely to announce further bad news. Locally, inflation has really gone high. It is likely to remain there. Things also don’t look great on the political side also. There is really no news that one can really look at in the short-run, hence one is seeing a whole host of the market movement.

For the first time, analyst might revise downward some of the growth numbers that they have put out for this year. For the medium- to long-term, markets still look okay. We have got to see how long this will last. We have got to wait and watch and see how markets are going. From what I hear, there are a lot of short positions building up in the market.

Q: How much of it comes in from the political turmoil that’s happening in Delhi? How much of it has been factored in by the market? Would any change at the Center be taken as a surprise?

A: The market is pretty much discounting all of these factors. It is difficult to say how much. Firstly, the market has discounted fundamental factors, which is inflation, higher interest rates, possible expectations of a further rise in interest rates, and the political uncertainty. The market has been discounting all of the local factors in addition to global factors. For example, if tomorrow the government were to fall over this, it wouldn’t come as a great deal of surprise. There might be some knee-jerk reaction but the market is pretty much discounting this uncertainty.      

Q: The markets will perhaps have taken the government falling in their stride and a new government coming. But how will they take the fact that perhaps no new government comes in with any sense of stability? The big fear is will that kind of uncertainty lead the markets into a may be an 18-month dry spell or thereabouts? Have the markets discounted that long political instability, if it were to happen?

A: No, people have not thought of the picture18-month down the line. They are thinking with an about 6-12 months timeframe right now and would take it as it comes. There is very little that anybody can do if oil continues to rule above USD 140. That is where India’s key benchmark trouble is. Try as much, but one can only take all fiscal, monetary measures.

India is not isolated in this. Everyone is waiting and watching to see whether crude will come back to USD 100 per barrel mark and will there be a respite. People are not thinking long with a 18-24 months kind of timeframe. They are still looking at a 6-12 months timeframe, which is where there is still some amount of visibility.