Jagdish Malkani, member of the BSE and NSE feels that the current market pullback is a bear market rally. RBI Governor Raghuram Rajan still needs to address issues of rupee, inflation and growth and there are enough storm clouds above, he told CNBC-TV18. He suggests investors to sell carefully in the rally.
Below is the edited transcript of his interview to CNBC-TV18.
Q: It was a bit of a scare on Tuesday, but last two days have been extremely strong. What would be your take on the market now?
A: It is a huge relief rally and last few weeks markets literally moved with the dollar and the rupee exchange rate. There has been this move up, which is welcome by the market.
The RBI Governor has set the ground running, tremendous announcements, moral boasting etc. Nothing has changed on the big picture front. He still has to bounce those three balls, of the rupee, inflation and growth.
He has no magic wand. He is the best man for the job, but there are enough storm clouds above.
Q: We are seeing Tata Consultancy Services (TCS) down more than two percent. Lot of these banks are much higher today. Would there be some nibbling into the banking sector as well as possibly soften your position on the likes of TCS?
A: Yes. This is a clear contra play. In all these last few sessions of carnage, it is the finance sector where FIIs held 33-34 percent of their holdings. Now, that has been reduced and beneficiaries have been 3-4-5 tech majors, which is also a play on the rupee rate.
Clearly, today with the banks back in the running, finance sector are those who take this thing. So, I do think, the big three-four the prices have run away a little too much.
If the rupee strengthens back to its fair value, which is in the early 60s, then these big tech stocks will take a further hit. On the other hand finance sector, I am not convinced, it still got lots of things to worry about.
Q: What would be your portfolio call in that case? If you are still worried about banks and IT stocks are overvalued – what would be the portfolio call then?
A: I would be very careful and probably would be selling gently into this rally. I still think it will get worse before it gets better. If there is good news from the Fed in mid-September on the taper business, then again one could have rally. But, overall it is still too early.
Q: So, you are saying this is still a bear market rally?
A: That is right.