SENSEX NIFTY
Jun 05, 2012, 02.20 PM IST | Source: CNBC-TV18

Mood downbeat but time to buy good values now: Citi's Vaish

The world is in a mess and turmoil. Investors are jittery about the world crisis and concerned about investing particularly in India. However, the risks are severe this time as India has to address it own macro problems more than the Greek crisis.

The world is in a mess and turmoil. Investors are jittery about the world crisis and concerned about investing particularly in India. However, the risks are severe this time as India has to address it own macro problems more than the Greek crisis.

Pankaj Vaish, MD and Head of Market-South Asia at Citi is worried that the sentiment is even worse than 2009 and investors are very jittery to invest in India. In a curtain raiser interview to the Citi's 7th India Investor Conference, Vaish speaks to CNBC-TV18's Udayan Mukherjee about the investors’ mood across the globe.

He stresses that India needs to hurry up in taking policy decisions, which may boost sentiments. However, there is a bit of optimism too as he feel, "Our opinion still is that at the end of the day valuations will come to the forefront and so there will be some good values to be bought at these levels. But the mood to your question is definitely downbeat and in some respects even worse than 2009."

To make the most of the difficult environment, Vaish advices to pick the right names which will add best values to the portfolio.

Here is an edited transcript of his comments. Also watch the accompanying video.

Q: How is the world looking? Is it still very uncertain?

A: The mood among our investors is still very downbeat. People are quite concerned as to whether there is some sort of a change happening and not just a cyclical one. Some people have started raising questions about the whole secular story of India and that's what actually worries me the most. So, until last fall I would say we were able to bat away even a 20% selloff by saying fundamentals are good, this is all for real. I think it’s in the last 8-9 months that people have started asking, is this story still intact?

Q: Even long-term investors?

A: I think so. Some of the clients in Singapore actually are asking for suggestions for three to five years which is amazing. It’s lovely to somebody with that sort of a time horizon. There was this sense that will they really be allowed to make money? What sort of backdrop is there? So very tough line of questioning which we have not heard in a very long time.

The mood is difficult. The mood is somewhat downbeat. But the good thing is there is not much going on elsewhere in the world either. Nothing very good is going on elsewhere in the world, so people do have the time to do the research and analysis. We are hoping they will come to our conference with time to sink in and take away all that will be presented at our conference.

Q: The anecdotal evidence that we hear from people is pretty much the similar to what you are saying except that some people make the point that while the talk is very bearish, positioning might not be so bearish yet. Have people actually sold because it’s not showing up in the numbers?

A: You are correct. For example, at least last year you saw some people in the August, September selloff, positions were liquidated. This time we have not seen that and by some accounts that can be construed as even more bearish that people have not yet sold.

As you probably know, I try to be an optimist most of the time, otherwise you feel like you just can't go on, can't show up to work. Since the long-term fundamentals still in our opinion are very good, you have to take these opportunities when valuations get better. 

 I think people are just frozen. They too in their hearts believe that long-term fundamentals are good, so they don’t want to look silly getting out at 12.5 and whatever PE. But they are asking me very tough questions like I was saying earlier which they have not asked in the last five years.

Q: Conviction is shaken?

A: Conviction is shaken and in some sense sentiment feels even worse than 2009. Then people knew it was a sort of collateral damage from the global crisis. Here it is far more local issues. We just can't blame Greece for everything. Those sort of questions are being raised. I am just giving you a picture of what the mood is.

Our opinion still is that at the end of the day valuations will come to the forefront and so there will be some good values to be bought at these levels. But the mood to your question is definitely downbeat and in some respects even worse than 2009.

Q: What are you telling your clients now? Is your central risk still global that in the next two-three months something very ugly might happen in Europe or are you still saying that the risks are local and you need to rise above that to outperform?

A: Our global chief economist Willem Buiter wrote a piece saying Greece will probably exit on January 1, 2013 and they will try to contain it as much as possible, the authorities but it will not be neat and clean. Probably, some sort of deposit guarantee may have to be put out for depositors in other peripheral countries. So, ECB will go down to 0.5%. LTROs of 4-5 years kind of maturities.

They think the global backdrop still got further to play out. In that sort of scenario it’s obviously hard for India to rally. This is over the next few months that the global backdrop is not positive. However, I think a lot of the problems especially with the currency and all that are of around and the proble is not just because of Greece. Because Greece story has kind of been there for two years and we have traded a pretty wide range.

I think what will happen is obviously Indian policymaking, decision making has to improve. Some amount of tactical management of the currency, so RBI is doing a lot and there are few more things that maybe tried and ultimately put your head down and work. 

Earnings are actually coming out okay broadly speaking. There are obviously spots that have not worked out, but broadly speaking earnings are coming out okay. Aditya Narain our strategist is still hanging to this 12-13% earnings growth for this fiscal year and so 18000-18500 kind of range on the Sensex.

Our view is in this environment you just do your homework and pick the right names and they will be good values to be had. The currency is something that I have talked about in the past couple of months also. Despite the optimistic view the currency has been one thing that has worried me a lot.

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