Mkts not in comfort zone right now: Mangal Keshav

Q: Coming to the point about the Dow hitting the four-month high - do you think that would have a rub off on sentiment in our domestic market with the kind of flows that we have seen over the last few sessions?

A: On the contrary, it’s expected that there is a good amount of interest moving towards the US markets and accordingly most of the emerging markets are seeing money going back. So the rub-off effect is not very convincing on the domestic market or at least the emerging markets side.

The rally is a combination of factors. There have been good results from some of the banks, the capital goods prices and the expectation of higher prices of firm prices in the metal side. So I would not subscribe to the idea that because Dow is moving up or the Japanese Index is moving up India will continue to move up.

There is a complete denial that now we are almost towards the bottom. So that’s why currently nobody has a position to hold on to anything lower than that. So in the case of denial, automatically it will move up.

My sense is valuation doesn’t justify anything significantly higher at this level. What we have definitely seen is volatility which has gone up which is playing its own role; we are seeing 200-300 point movement in a day on the Sensex. I would not read too much into the secular trend because of volatility.

Q: What would you do with sugar as a space?

A: Many times we are not comfortable with the way sugar prices are behaving. But yesterday’s reprieve to the sugar mills by asking them to pay Rs 110 per quintal has definitely given them an immediate relief. Having said that, we continue to see that the demand-supply situation continues to remain unfavourable for the millers and the valuations that they are quoting, obviously does not justify that. So we are not very bullish and we do not recommend these stocks.

Q: There have been some murmurs about how inflation might come in a bit higher this time around, anything that you have picked up or you would watch out for the inflation figure this week?

A: Inflation continues to concern all of us particularly the market participants. We are seeing that it will take more time, maybe 4-6 weeks before it actually comes in some comfort zone. If it comes below 6.5% in the very short-term, it will not be much of a change from the previous week. It will broadly be in the same range of 7.4%-7.5% but it will play out. Most of these steps that have been taken, both on the fiscal or monetary side are already seen in a liquidating situation, getting tightened. This week onwards, we will see another round of CRR to come into play and therefore it is likely to come down. All steps will play into effect not in exactly one or two weeks; but four-six weeks and we are expecting it to come below 6.5%.

Q: Any thoughts on the brokerage space?

A: It’s an interesting space to be with though there are no larger companies within the segment and this year, the overall volume has come down. So that’s another pressure. The overall model that is evolving for the brokerage companies is nearly from a broker to a complete financial intermediary. The overall expansion plans and things like that which they are going with, augur well and we will see more players coming into this space, making it a more formidable space.