SENSEX NIFTY
Feb 01, 2013, 06.11 PM IST | Source: CNBC-TV18

India in bad shape; doubt mkt will rally post budget: Ambit

Andrew Holland, CEO (Equities), Ambit Capital says India is one of the worst performing markets globally this year. "It might be flashing green, but stock prices are really not moving," he told CNBC-TV18 in an interview.

Andrew Holland

CEO (Equities), Ambit Investment

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Andrew Holland, CEO (Equities), Ambit Capital says India is one of the worst performing markets globally this year. "It might be flashing green, but stock prices are really not moving," he told CNBC-TV18 in an interview.

Analysts are expecting money to flow out of bonds and into equity. However, Holland is not convinced of the "great rotation" theory. "I have to be convinced a bit more, and certainly after the data coming out of the US and China, that kind of backs up my cautiousness at the moment. I am not sure if this big move from bonds and equities, which we have seen every year in January for the past three or four years, will play out just yet. So a little bit cautious actually," he says.

Also Read: Nifty stable; Suzlon, Videocon rally 6.5%, Bharti up

Weak GDP data and jobless claims from the US, struggling China manufacturing, and even though bond yields in Europe are looking better, there is talk of recession in the UK. The Purchasing Managers' Index (PMI) in Europe may start to slip again. "That would auger well for the bond market because there has been no growth like what people were expecting. That is what I am cautious about and those are the data points I am looking at," Holland says.

For the Indian market, Holland says, a lot of people will focus on what the finance minister says in this year's Union Budget - the last one before the general elections.

The word on the street is that the market is going to run up ahead of the budget. The government might deliver a populist budget and the market may get a follow-through after that. Coupled with the buoyancy in global markets, it might push the Nifty over 6500 before the budget and then 6700 afterwards. "It is horribly consensus and something tells me that I should be a little bit cautious when everyone is saying the same things," Holland warns.

Below is an edited transcript of Andrew Holland's interview on CNBC-TV18

Q: How are you calling the market for February, given the kind of money we still seem to be pulling?

A: We are flashing green and are seeing great inflows, but the market has not done much. It is one of the worst performing markets globally this year. So it might be flashing green, but stock prices are really not moving. I am not convinced on this great rotation trade.

I have to be convinced a bit more and after the data coming out of the US and China, that backs up my cautiousness at the moment. I am not sure if this big move from bonds and equities that we have seen every year in January for the past three or four years will play out just yet, so a little bit cautious.

Q: A lot of people are feeling cautious because it has been a relentless rally and people have started getting a bit complacent in global equities as well. Can you see a trigger ahead which can usher in some risk-off after many months?

A: I can. The GDP data from the US indicates the jobless claims in the manufacturing of the US and China. Even though bond yields in Europe are coming out, you are talking about recession in the UK, the Purchasing Managers' Index (PMI) in Europe starting to slip again, so that would auger well for the bond market because this is not the growth that people were expecting. So, this is what I am cautious about and those are the datas, I am looking at the moment.

Q: Would you say the chances of a pullback in the market are higher than another 5-7 percent extension on the way up?

A: I think for the Indian market we do have a single event which is the budget and I am not usually keen on the budget and the expectations, but this time, there will be a lot of eyes focused on what the Finance Minister does, because it is the last one before the elections. There will be a lot more commentary and a lot more expectations ahead of that.

Everyone is saying that the market is going to run-up ahead of the budget, it is going to be a great budget and we are going to get follow-through after that and because of the global markets helping that will push the market to, say Nifty over 6500 before the budget and then 6700 afterwards. It is horribly consensus and something tells me that I should be a little bit cautious when everyone is saying the same thing.

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