Ajay Bagga, CEO, Lotus Asset Management said volumes are very low and the market is very global cue-driven. He told CNBC-TV18 that in this kind of market, one can only anticipate a lot of rangebound behaviour and volatility.

Excerpts from CNBC-TV18’s exclusive interview with Ajay Bagga:

Q: What is the prognosis for the month of May? The start has been quite choppy?

A: Yes, the volumes are pretty low. Volatility is high and the market is very global cue driven as seen today. Of course, the base effect does spare down the disappointment on IIP numbers to some extent. But the 3% number is a real disappointment.

If you see across sectors, be it consumer goods or capital goods, we are seeing a very severe slowdown. It is largely the base effect of last year but it still lops off 1% of the growth expectation of industrial growth for this year. Clearly, analysts are downgrading their expectations for this year.

We saw the market bouncing back on global cues on a stronger European opening looking at good US futures. So, in this kind of a market, you can only anticipate a lot of rangebound behaviour and a lot of volatility. Until the volumes really return, you can’t really hold positions for a long time.

Our recommendation again would be to try, be patient and look longer-term and come through the mutual fund route rather than going and trying to trade yourselves.

With this kind of intra-day 300-400 points volatility, you cannot really be a day trader and hope to make money on this market.          

Q: How are you reading the moves on the currency? How do you think that is going to impact flow interest for our market, aside from its sectoral impact for the Sensex or the Nifty?

A; Yes, we were talking to some foreign investors last week and people were concerned that they are not making money in this market. Largely, it is an impact of us being the net importers of significant commodities unlike most of the other emerging markets which are big exporters of commodities and who have some gains coming through. We are in the wrong spot. India is at the receiving end.

We are seeing a deterioration coming in and the latest Forex results numbers for May 2 are also negative and that is causing worries for the overall economy. It might be good for some export driven sectors like technology, textiles, gems and jewelleries. We are seeing that impact straightaway coming through in the stock prices on those sectors.

But for the broader economy, this weakening of the rupee is bad news, largely because of oil having such a predominant place. The oil price is not passing through right now. But it will come through in the fiscal deficit and that will have an impact on the overall economy and growth trajectory eventually.

The Korean currency saw a significant depreciation last week and we have seen the Chinese authorities not finding it so attractive to appreciate it so much. So, we are seeing a slowdown at that end also. But overall we remain the most impacted country largely because of our edible oil bill and to a limited extent some of our food bills and the coal bill also, which will impact us quite badly.

Q: What is the call on steel now for you?

A: Steel was weak even in the Asian markets. For us, the domestic news flow is really spoiling the whole picture. Overall, if you see input costs have gone up, coking costs are nearly 3 times and iron ore contracts have been negotiated 65% higher year-on-year. So, input costs are high and the pass-through ability is constrained because of domestic policy pressures. Clearly, steel is suffering because of that. We are not very bullish on this sector and would really advice caution.   

For more Mutual Fund Interviews click here