DMKs pullout from the UPA government yesterday, was completely a surprise for the market. Nirmal Jain, Chairman of IIFL told CNBC-TV18 that now the government is looking more fragile and there is real possibility of early elections.
Fundamentally, he does not take it as something negative and believes that Nifty should not fall significantly from here. Jain sees the Nifty rangebound between 5700 and 5750 levels.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: Wild swings in a way this morning but essentially subdued action. How are you viewing the on goings on the street? Is it essentially a bear market?
A: I won’t call it a bear market, but there are quite a few negative things that are converging. On the political part DMKs pullout yesterday, was completely a surprise for the market. Now, that the government is looking more fragile, there is a real possibility of a re-election, coupled with problems that we have in Europe.
Not to forget, continuing problems here back in India in terms of project not getting off the ground because of the government’s inability to clear and get it act together. So, all these factors are combining. Whether we like it or not our markets are highly vulnerable to the newsflow from foreign institutional investor (FII) front.
In the global front because the market has been running only with FII money as we are seeing that domestic mutual fund and insurance companies have been net sellers. So, markets will be fragile and that is what is happening now.
Q: Do you see Nifty range bound between 5700-5750 levels at least for the near term at least till the political situation stabilizes or do you see bit of a pickup at least after the sharp cuts today and of course yesterday as well?
A: Fundamentally, I do not think that anything what has happened is negative. So, I would like to believe that Nifty should not fall significantly from here. Maybe 4-5 percent on the downside and also should consolidate in the narrow range.
However, unless there is some new event that we can’t foresee today and not that causes or becomes another trigger, I would like to believe that Nifty should be range bound at these levels.
Q: Any thoughts on rate sensitive's, even despite the Reserve Bank of India’s (RBI) rate cut banks, realty stocks all of this getting hammered in trade. How are you viewing that?
A: RBIs rate cut was on expected lines. However, what was unexpected was RBI Governors very cautious statement saying that there is very little room for further rate cut or further monetary easing. The 25 basis point rate cut was more or less expected. In fact given the fact that growth has slowed down significantly, people were expecting 50 basis point.
However, what came was 25 basis point and on top of that a very cautious warning that don’t expect too many rate cuts beyond this. So, that is what is viewed negatively by the rate sensitive’s.