Online
Nuke deal may be cause of concern for mkt: Tata MF
Published on Thu, Jun 19 at 11:52 , Updated at Thu, Jun 19 at 16:55
Source : CNBC-TV18
| ads by google |
Q: Still no direction just about tossing around in a range. Do you expect to see more of the same or more cracks in the market? A: I guess I am afraid we will see more of the same. The market is in a consolidation phase. A lot would depend on news that would come, like local political news, inflation numbers, interest rates, or what’s happening to crude etc. It would be a highly news flow driven market till we come to the next earning season. It would be a rangebound market and not very exciting. Q: Do you think this nuclear deal issue might present any kind of hiccups from a market perspective or it will come and go, resolve itself whichever way with the market not noticing? A: I am not a political expert but I would say that from what one reads in the newspapers, it does seem that this will cause the market concern. But if you look at the broad market there is a lot of value that is now emerging in sectors that had been favourites in the past in the market; be it banking, capital goods or engineering. There was no major downside there, there may have been a momentary downside. Hence as we have seen domestic investors, funds etc have been nibbling into the market wherever value has been emerging.
Q: What’s the problem with the mutual funds, who are still sitting on cash but not quite deploying it. Is there a general feeling, which people are not articulating that prices will come to better levels for them to deploy over the next few weeks and months? A: There are three-points that I would make here. One, is that mutual funds normally is at about 5-6% of cash, which is to meet the transaction requirements, other margin requirements for hedging etc and any other prudential redemptions. At the most, there might be another 4-5% of cash over and above this that mutual funds hold. That maybe because they feel that value will emerge at lower levels. Last point I would like to make is that, there is also always a threat that if the markets are too volatile there might be some outflows and some investors might want to redeem. Since no investors have redeemed in this volatility as of now, I guess the funds which had raised cash earlier in the anticipation of this volatility and the redemption are still holding that cash and may deploy it later. So I would it is a combination of these three factors that is causing the mutual fund industry to have some cash in its books.
Q: Do you think we will get any kind of respite from the earnings in July, some good news, which will lift sentiment a bit or is that being too wishful? A: The earnings will be on track I don’t think earnings will slowdown. Inflation is actually a friend of the equity markets, in the sense that it gives pricing power to the companies. If you look at the historic data, which is there on inflation in India and in other parts of the world, some amount of inflation is actually good for equities. It is an impetus to earnings growth. Of course if it is hyper inflation it is bad for every market. So I would say that the earnings growth headline numbers will not be a cause of concern in the next quarter or in the next few quarters.
Q: Do you see interest rates going up more from here because banks despite appearing cheap are just not giving you any sustainable recoveries? A: Absolutely. I think the interest rates are bound to go up a bit from here. I do not think that they will go up too much. But they will certainly go up a bit. Inflation is high, it is a political year of elections, other economies like the US will hike interest, the Euro zone will also hike rates and the rupee is weak. All these factors combined would certainly lead to a scenario where there would be some tightening. I do not think it will be huge but some there certainly is some upward bias on interest rates. If companies really want to borrow, the larger companies can certainly borrow from overseas now. Those limits have been liberalized and their rates are not so high. Also the fact that by and large when you speak to companies it is very surprising that none of them are really talking about a slowdown. Even if you speak to capital goods companies or companies in many other sectors, they are still very positive; IT companies are very positive. But the market language is somewhat subdued for reasons we all know.
Q: How long will this painful period last according to you one-month, three-months, six-months? What’s your best guess? A: My conjecture is that 2000 and 2008 will be very similar years. So 2008, will go down as a year when the markets maybe consolidated and came down a bit. The next uptrend will be in the backdrop of a decisive political mandate. The current uptrend in the markets was linked to a decisive political mandate about five-years ago. I think the next uptrend will be linked to a decisive political mandate somewhere around next year. I do not know for whom that political mandate will go. But I think that will set the platform for the next market rally in India.
For more Mutual Fund Interviews click here |
Ved Prakash ChaturvediMessages on MF Investment Help
Other comments
Dear round rock, during past 1 month, HDFC had increased the home loan PLR 2 times. so at the revision time in oct,...
in MF Investment Help - ashalanshu at 21-Aug-08 12:20
Dear Raj, congrats. once again u r bang on target with an important & timely research. thanks Ashal...
in MF Investment Help - ashalanshu at 21-Aug-08 11:11
Rate this article
More on Mutual Funds
News
21-08 UTI Pharma & Healthcare Fund declares 15% dividend
21-08 MF NAVs bounce back as mkts gain
Investing Trends
19-08 SBI Magnum Tax Gain picks oil, engg; drops IT, metal
19-08 SBI Infrastructure Fund buys engg, utilities; sells metal
Expert Advice
20-08 Look out for change in fund attributes!
14-08 Emotions can ruin your equity returns - Are you prepared?
Wealth Tips
Chat
Ajay Bagga
CEO , Lotus India AMC
(21 Aug- 16:00hrs)
Investing in uncertain times
Poll
Newsletter
Keep in touch with News day & night. Subscribe to:
Mobile Services
Get news on the move SMS to 52622
- SMS M for Market News
- SMS B for Latest Business News
- SMS S (stock name) for latest news