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Use PN sell-off to buy: Notz Stucki

Published on Wed, Oct 17, 2007 at 10:47 | Source : MC

Updated at Fri, Oct 19, 2007 at 11:55

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Anil Singhvi , Partner, Notz Stucki , said P-Notes has been a big problem for regulators for a long time. He feels every fall is a long-term buying opportunity. "Sebi's move is positive for the long-term and is not a draconian measure."

Excerpts from CNBC-TV18's exclusive interview with Anil Singhvi:

Q: What is your reaction to what has happened this morning and how the draft guidelines were formulated?

A: P-Notes was one instrument which was the bone of contention for RBI, Sebi, and the Ministry of Finance for a very long time. A lot of positions were taken on that. This notification by Sebi on whether it should be allowed or not allowed should not be taken as a bold from the blue. It was there in consideration for a very long time. The issue is whether Sebi has come out with this as a draft guideline or are they really going to implement this. I don't think Sebi would have really come out with draft guidelines without consultation with RBI and the Ministry of Finance. It has a far-reaching consequence to my mind and is almost like a fate accompli which is something that we are going to live with. P-Notes had become a major problem for the Ministry for a very long time.

One has to take it in a right perspective to see why this has been done. You cannot have a situation where you allow your stock markets to be operated by the people whom you do not know. Then India would have become a safe haven for people to play up any kind of money. It is a very good move by Sebi. A knee-jerk reaction, if there were any P-Notes ban, would have come; it would have been much more. Here Sebi has allowed an 18 months window for people to get registered and take their positions.

Q: What is the call on the market now regardless of the cut that has come in today? Do you think it will present a buying opportunity or would you want to wait for this policy action to clear up?

A: There are two issues in this. If you are a long-term investor, every fall in fundamental stocks is a buying opportunity. If you want to play the market with derivatives and the Nifty, then perhaps you have to take a day-to-day call. India is a good market, which has lot of values. Whenever there is a dip, you should buy.

Q: Some call this a move towards capital control. Earlier it happened with ECBs, this time it is happening with P-Notes, do you agree with that?

A: I do not think so. P-Notes have been in discussion for the last three years, so let us not look at P-Notes as a one off situation, which has come in overnight. P-Note was a problem and Sebi was trying to muzzle that. Most investors should get registered here and should make investments. I would not read too much into what Sebi has done. I don't think it is a draconian measure as you have described it.

Q: Do you think we have seen the worst for the day?

A: There will be little more pain. If you look at how our stock markets have gone up in the last four-six weeks post September 18, I think the markets were bound to correct. They may have taken this P-Note ban by Sebi as a clue to correct itself. Sebi could not have come out with this unless they had checked with RBI and Ministry of Finance. This is a government move to check the influence of capital and the quality of the capital. This is not a Sebi or regulatory move. A little bit of pain will still be there for a couple of days because huge positions have been built in the F&O market.

Sobriety will come in the next four-five days time. This whole momentum mania, which has been there for last about four-five weeks, will have some sobering effect. Maybe markets were looking for some trigger to correct. I would not like to blame just P-Notes for this correction in the market as the markets were due for a correction.

Q: As someone who runs a fund, what did you read into the Finance Minister's statement when he is saying that he is not happy with the amount of money coming in? Would you not be upset if you had a fund running and there was more money coming in, but you simply could not raise that cash or deploy it in India?

A: Our advise to our own funds is very clear. We are long-term investors here and are not looking at a day-to-day situation. I agree with the Finance Minister when he said that companies are doing well and we must be looking at fundamentals rather than looking at technicals or just money flows. Money flow will come depending on the economic situation, political situation, and financial situation of a company. It cannot be devoid of any of these factors. Today, India is at a good platform in terms of political stability, the economy and companies are doing well. Whenever markets go overboard on this issue that they have far ahead of the fundamentals, they have to correct.

There could always be a trigger and the trigger today came in by way of P-Notes. I do not read too much into this whole situation to raise an alarm that India is no more a destination for foreign investors. We have been investing for the last several years in this country and feel very strongly that this country has very good fundamentals. I am glad that we are not going the way Thailand was in 1997. A similar kind of situation was there and then there was a complete rout. We do not want to get into a boom and burst situation, India has held out very well in 1997 post the Asian crisis. I want to complement everyone that in 2007 also we are taking such steps so that it does not become a bubble.