Mkts may remain rangebound for CY08: Franklin Templeton

Vivek Kudva, President India of Franklin Templeton Investments said the markets may remain rangebound for the rest of the year. He told CNBC-TV18 that the market has already discounted slower growth rates. He added that if the markets grow at 7.5-8%, the normal GDP will grow at about 12-15%.

Excerpts from CNBC-TV18’s exclusive interview with Vivek Kudva:

Q: Is the improvement in the stock markets for real? Would you say that the market is out of the woods? Are we are going to see ranged times for the rest of 2008?

A: I won’t say about 2008. This is probably a fair value for the market where it has gone down to 15,000 and then moved up about 15%. So, this is fair value and I wouldn’t be surprised if it stays roughly rangebound from hereon for the rest of the year.   

Q: The industrial output numbers resulted in a sell-off of the rupee and in buying of bonds. But the stock markets remained unruffled. Is weak IIP numbers not reason enough to sell stocks?

A: No, the market has already kind of discounted the slower growth rates. Earlier, one was expecting GDP to grow at anywhere from 8.5-9.5%; the markets expectation is now 7.5-8%. For that growth rate these levels are fine. If the markets grow at 7.5-8%, the normal GDP will grow at about 12-15%. The market should grow at those rates. So, in a sense it is not a question of whether the market has reacted strangely. This is more or less right for where the market is today.       

Q: The market has been in a range. How broad would be that range at the close of this year?

A: I would say about 10-15% from here.

Q: What are the sectors that you would buy, where would you see fair value? What do you have to say about the range?

A: Around 15% growth from hereon is a fair expectation. If the market is 17,000 today, one should look at about 15%. So, by the year-end, it should be about 18-18.5.

As far as sectors are concerned, financials, telecom and IT services are still good as far as we are concerned.

Q: Do you think that interest rate sensitives, like autos and realty, are buys; if the bond markets guess is right and rate hikes are not on the anvil?

A: Rate hikes may or may not be on the anvil. But I don’t see rates coming down that dramatically. So, for the rate sensitive sectors to really move, rates have to come down quite significantly and I don’t see that happening.    

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