Indian equity benchmarks have rallied over 5% in the past week and a half, buoyed by hopes of a rate cut by the Reserve Bank of India. Amisha Vora of Prabhudas Lilladher, however, is not too positive on the market going forward.
“Except for intermittent rallies, we think the market will see a choppy and volatile phase for next two-three quarters,” she said in an interview to CNBC-TV18.
Vora believes that the current slowdown phase that the economy is stuck in will continue for a while longer mainly because of the lack of any policy decisions. “The only saviour will come two-three quarters down the line when exports pick up because of the depreciated rupee,” she said.
Vora doesn’t expect the central bank to deliver a rate cut come Monday, which could dampen sentiment on the street. It is due to this uncertainty ahead of the event that Sudarshan Sukhani of s2analytics.com advices booking profits. “There is no sense in staying in this market when we are going to get a lot of volatility,” he said, adding that it is best to exit because the market will see-saw its way through the next few days.
Also read: Rabobank says India is a safe haven
Below is an edited transcript of her interview with Sonia Shenoy and Udayan Mukherjee. Also watch the accompanying videos.
Q: After you looked at the inflation data what do you think the RBI will do on Monday? Will be cognizant of the high inflation figure and not move on rates or are you still expecting to see something like a 25 basis points cut?
A: I think at best 25 basis points may come, but I am not very hopeful. A little more clarity will emerge on both the food and primary article front post July, when the monsoon would have set in. That is when we will get little more confidence on those two aspects within the inflation basket.
Of course the manufacturing side inflation seems to be in a range despite the depreciation of the rupee in May. This is not very heartening but it is not as bad either. I feel that a little more clarity on the trend in inflation will emerge once we get evidence of a little more rainfall.
Q: What about policy leading up to the presidential election on July 22 and how are you reading the rumblings from New Delhi over the last 48 hours?
A: I think we are in an eternally hopeful situation as we have been in last 16-18 months. We will continue to be because what we have been hearing is that the decision making will continue to remain slow.
There have been some statements that infrastructure projects will come to revive the economy, but if you talk to some of the key infrastructure companies, they are saying that they are in no position to take large infrastructure projects. Working capital cycles have extended from 65-70 days to 130-140 days and most there is no decision making in some of the existing projects.
In this situation, if they take large infrastructure projects, even banks won’t have enough room to keep on lending for some of these projects. So even if some headline statements or a little bit of action comes to revive economy on infrastructure side, I think it will be pretty insufficient. The key decisions which we all are waiting for, be it on diesel, FDI or other key reforms won’t come soon.
Q: With regards to Tata Motors, all of the growth expectations hinge on the JLR numbers which are expected tomorrow. What are you hoping to see there and would you buy Tata Motors at Rs 220?
A: I think a good correction has taken place. We understand that the demand outlook is sober across Europe, but this has been the case in the last 3-6 months even when they were churning out good numbers. I think a change in product mix and change in EBITDA margin versus the market expectation has taken too much of a toll on the stock. This could be a very good range to look at this again in the current price range for medium to long-term investments.
Q: If the RBI does not move, not just in this policy but even through the course of the year, how would you approach the market and rate sensitives?
A: Our feeling is that even if the RBI takes a few steps, it is going to take long to show on the economic indicators. The market may keep showing some intermittent rallies which could be because of some RBI action or because of some of international events turning differently than what market is apprehending, but the slowdown phase that we have entered is going to last for a while.
The only saviour will come two-three quarters down the line when exports pick up because of the depreciated rupee. Otherwise, except for intermittent rallies, the market will see a choppy and volatile phase for next two-three quarters.