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You are here : Moneycontrol » News » MARKET OUTLOOK

Mkt looks fairly priced at the moment: HDFC Sec

Published on Wed, Jun 11, 2008 at 11:10 , Updated at Thu, Jun 12, 2008 at 10:49
Source : CNBC-TV18

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Abhay Aima of HDFC Securities said that the environment both internationally and domestically is definitely not good. He believes that this is a positive point for investors because as there would be wealth creation if the  markets stay at a reasonable level for a longer period of time. He said that  when there are phases of consolidation at reasonable levels for longer period of time, that is when one accumulates stocks that give good dividend over a longer period.

 

 

Excerpts from CNBC-TV18’s exclusive interview with Abhay Aima:

 

Q: What is your call now? We broke through the January and March lows, where will we go from here you think?

A: At the current levels purely in terms of valuations and not technicals, it looks fairly priced and way away from the over valuation that existed. So looking at broader perspective, given that the P/E’s have come to more rational, reasonable levels, it is a good investment bet.

 

Q: Your point about valuation is taken but how are you reading the general macro environment that is leading our markets up or down?

A: Both internationally and domestically the environment is definitely not good which for an investor should be a positive point because I believe wealth creation happens if markets stay at a reasonable level for a longer period of time. If there are sharp spurts in the market then what one does is one buys and then sells but when there are phases of consolidation at reasonable levels for longer period of time, that is when one actually accumulates stocks and those are the ones which actually give dividend over a longer period of time. If the market stays in this level till the end of the year and if you have bought a stock, you tend to forget about it an don’t sell the stocks. Once that gets into your portfolio and if you are in a growth economy like India, these are the ones that give you really high dividends from.

 

Q: What is your sense of how the rest of the year will shape up? In dollar terms we have already fallen about 35%. Do you think we might remain range bound as many expect for the next six odd months or might there be more bad news towards the end of the year?

 

A: I hope we stay range bound and this is the lower end of the range. Not being a chartist, I cannot possibly say whether the Nifty will go down by 100 points or no. By and large this does looks like the lower end of the range..

 

Internationally there is a lot of turmoil and so stabilisation will take some time. The other disturbing factor is the USD 5 billion outflow from the Indian economy. This definitively has an impact on short-term.

 

From an FII perspective one needs to look at India as a stock in his basket. India is an expensive stock. At its peak the average, added differential on the PE between the emerging markets and India was as much as 60%. Yesterday this number came down to something like 22%. But I believe India will continue to be an expensive stock. The downside in an expensive stock like any other stock is when there is a downfall, one tend to sell the expensive stock or stocks where one had made the maximum profit first. So technically that is a problem.

 

 Q: What is the central risk to the market in your eyes?

A: The short-term risk in terms of technical risk is the political scenario which always creates uncertainty. Markets do not like uncertainty, but one has to see that stage at which the market is in when the uncertainty comes in. So depending upon how bad or how high the market is, one can look at it differently and say that the uncertainty is over lets now get into the market. One may also say that there is uncertainty get out. So when the event takes place you have to see what the situation of the market is, so that clearly is a problem.

 

Oil at current price is a problem both domestically and internationally. I don’t see interest rates as a major problem in India as long as the growth is where it is. Neither is inflation a problem, contrary to what most economists believe, given the fact that we will continue with this growth.

 

Q: The turn around this year has been effected in sectors Pharmaceuticals, technology, FMGC; from amongst these 3 pockets is there anything you like right now?

A: There can be flavours like the real estate stock going up but as a percentage of GDP it’s around the fifth decimal place and so by definition it has to be a short-term play. The services sector which includes technology forms almost 55% of the GDP. If that is represented in the stock market then one needs to be in that sector because one is looking at GDP growth.

 

The other reason Pharma, FMCG, Technology have been out performed beside the rupee-dollar ratio is the fact that these stocks are under owned.

 

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