Mkts to become stock-specific: Vallabh Bhansali

Q: What do you see with environment right now both economically and from an equity market point of view over the next few months?

A: We are hitting the bottom of sentiment, which is a good thing and gradually we will be news-driven as results, production numbers come out and as inflation starts coming down in couple of months but this is a difficult period. 

Q: Do you expect interest rates to harden even more from hereon and is there a possibility that PE multiples contract more because of the kind of interest rate increases we are seeing? 

A: The Reserve Bank of India has been hawkish and we would have heard a lot about it already. RBI will act much faster than the others. The economy will take a little longer to come up and settle.     

Q: Up until now, we haven’t seen any deep damage on the earnings front because of the way interest rates are likely to move now. Would you be concerned about earnings scale down over the next few quarters? 

A: It’s more than interest rate because in absolute terms, interest rates may not be high; they are leveraged in many sectors in the economy. Lot of the interest was related to capex and therefore that will still get capitalised. So earnings damage may not happen. But it is a sentiment that is an issue more than interest rates. 

Q: There is also an interesting comment from RBI saying, “The new reality of high and volatile energy price is not necessarily a temporary phenomenon.” In an environment where crude prices have been trading the way they are, do you think our own markets performance might be subdued for a long time before we see any big pullback in crude? 

A: I would not want to guess on what happens in the very long-term. But the world has recognised the speculating element in energy prices; there will be a concerted effort to bring down these prices. Also high-energy prices are there for everybody to see - how they play out in the long term is not a worry; what we are suffering from is an overdose of optimism and to that extent oil prices have helped to burst that optimism. It’s good news but one does worry about oil price. I do not want to plan anything on the basis that for all time to come oil prices will be high.

Q: It’s six months already since the difficult times or actually getting on to seven months is difficult time started? Do you expect this difficult stretch economically and from an equity environment to persist for some more time? 

A: I would think that this is not going away in a few weeks though markets have reached level where it will tend to rally from time to time. The growth is not gone but it is slowed down and that’s about it. There will be opportunities to be tapped. So markets will start moving towards what we call as stock-pickers market soon.