Fiscal deficit to affect corp expansion plans: ICICI Direct

Pankaj Pandey, Head-Research at ICICI Direct, said macro domestic cues are not positive. He believes because of the fiscal deficit, the Reserve Bank of India might have to borrow more from the market, which will keep upward pressure on the interest rates leading to the rationalisation of corporate expansion plans.

Excerpts from CNBC-TV18's exclusive interview with Pankaj Pandey:

Q: We have seen some fairly debilitating noises coming from overseas although the Fed has or rather Mr. Henry Paulson has announced that the two housing companies Fannie Mae and Freddie Mac will get perhaps or should get more money from Congress or the exchequer. The financial sector over there is pretty wobbly. What are you expecting by way of global cues and how bad can it get for the Indian markets?

A: Besides global markets, the domestic cues are also not positive on the macro front. What could eventually happen is that because of the fiscal deficit, the Reserve Bank of India might have to borrow more from the market and that will keep upward pressure on the interest rates leading to the rationalisation of corporate expansion plans. So that would be a big worry for the market if factors like crude oil and inflation does not come down.

Q: Therefore, are you marking down your EPS growth projections for the current year itself or would that be reserved for FY10?

A: We will wait for a while more before we downgrade our estimates. But at the moment, situation is more likely to be on the negative side. That’s a big worry we have at the moment.    

Q: Are you a buyer in any counter in this current state of the markets, Ranbaxy for one?

A: Ranbaxy we have not recommended to our customers, but in pharma we have recommended Piramal and Glenmark Pharma. Besides we have recommended some midcap pharma stocks like Mercator Lines and Usha Martin.