Mar 25, 2013 05:48 PM IST | Source: CNBC-TV18

Mkt should focus on growth, CAD than politics: Religare

Commenting on the statements coming out that the Samajavdi Party has threatened to pull out from the UPA Tirthankar Patnaik of Religare says there is no reason for the market to take negatively from these statements and one needs to take a measured stance.

In an interview to CNBC-TV18 Tirthankar Patnaik of Religare said that the market should focus on economic growth than political developments in the country.

"The real worry for the market more than politics are two roadblocks growth and current account deficit (CAD). It is important to see how the government aims at tackling these problems and if there would be any reforms which would help solve these roadblocks," he added.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: What have you made of the possibility of a third front emerging? We have heard this threats several times in the past, but is there anything new to irk the markets now?

A: The possibility of a third front was the highest before the Bharatiya Janata Party (BJP) actually took the baton away in July of last year. So in our calculations, we don’t believe the third front has any meaningful locus standi at this point. None of the major parties are in a position for elections at the moment and we do not see elections panning out purely by these statements.

Given the fact that Dravida Munnetra Kazhagam (DMK) has pulled the plug, the importance of parties supporting the (UPA) from the outside actually has risen and what we are seeing is essentially fallout from that.

We do not believe the market has much reason to take negatively, purely from these statements.

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Q: This just shows that this market has no reason to go up at all. Either one day it is global, the other day it is political, but this seems to be a sell on every little rally in the market. How would you approach it now at this 5,640 level?

A: For the market the roadblocks are two-fold and they are not political in our opinion. The roadblocks are growth and the current account deficit (CAD). We do not know what concrete plans the government has in terms of bridging the CAD from a sustainable perspective.

Second is growth, we do not believe that even FY14 with a slower growth rate would be enough for the slowdown in the current growth cycle to pan out. We really don’t know if there are answers that the market has to these two questions. Politically, I don’t think the worry is really there.

Q: Getting back to the point of a possible Samajwadi Party (SP) numbers game playing out - do you just think that besides early elections, just the reform process is going to become a bit of a struggle in 2013. For example something like pension reforms etc. something, which the SP has inherently opposed, is just not going to go through then?

A: For the market what is important is any of the reforms, which solve the two problems of growth and current account deficit (CAD), if we have reforms in place or executive decisions that get capital into the country like the Finance Minister announcing foreign institutional investor (FII) bond limits to be rationalised or the diesel price hike coming through those are welcome.

Pensions and insurance are not going to bring in capital in a meaningful way. So, what we are saying is while these are good to hear, for the market I don’t think they are moving the needle in any sense.

Q: The CAD according to the Prime Minister’s Economic Advisory Council is expected to be 5 percent for FY13. Would you agree with that and what would your assessment be on the CAD trajectory?

A: We said this about six months back. The second quarter CAD was 5.4 percent. The third quarter numbers will come in on Thursday, I think they will be north of 6 percent and for the year, we will end up at 5 percent number.

The question is what does India do to bring back export growth and we do not see that coming up in a very meaningful way even in FY14. That for us is the concern really.

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