Mkts may retest recent lows: HSBC AMC

Mihir Vora of HSBC Asset Management believes it looks like a volatile next few months. The first half of the year will stay volatile, but the valuations are very attractive, he said. So opposite forces seem to be working in the market.

But he wouldn't rule out a possibilty of markets retesting recent lows.

Excerpts from CNBC-TV18’s exclusive interview with Mihir Vora:

Q: It split down the middle now. What are the chances that this market might go back to test the lows we have seen earlier this year or do you think at best we will remain in a rangebound performance for this month?

A: I have been maintaining quite consistently that it looks volatile for the next few months. We are in for volatile times in the first half of the year, which is till June-July, because there are local and global headwinds. On the other hand, valuations are more attractive than they were before. So, it is two opposing forces. I wouldn’t rule out the possibility of the market testing the recent lows that we have. I don’t expect them to stay at that level for too long. But one cannot rule out that possibility. It could happen once in the next few months.

Q: If you had to pick out one big issue that would worry you about the market for the rest of this month, what will it be between the currency, the way crude has been moving, and the risk of big outflows this time?

A: I would say the commodity price inflation is the biggest concern out of the three that you mentioned. I am not too worried about outflows because global liquidity is quite robust. We have seen central banks not being too tight beyond a point. In the US, we have seen such sharp cuts, but liquidity is not a problem.

So, essentially its inflation both in food and non-food commodities that I would put as the first concern for the Indian markets. We still remain an importer for almost 60% of our oil requirements and every rise in oil prices adds that much to the inflation pressures if not directly then indirectly in terms of the deficit that we are in. Unfortunately, this comes at a time when food inflation has become a very big issue and both these put together are really putting pressure on the overall fiscal situation. So, I would rate inflation as the No. 1 concern right now.

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