Sep 16, 2013, 08.24 AM | Source: CNBC-TV18

Banks to consolidate if policy turns out hawkish: Emkay

If there is a pragmatic view and if the policy pronouncements are positive then that becomes more rally in the banking sector. Otherwise, there has been a decent rally and banks should consolidate at these levels, says Krishna Kumar Karwa, MD, Emkay Global Financial Services.

The markets and India particularly will be watching both the Fed announcement and the Reserve Bank credit policy expected next week, says Krishna Kumar Karwa, MD, Emkay Global Financial Services.

The new Reserve Bank  governor Raghuram Rajan postponed policy meet from September 16 to September 20 because he wanted to fine-tune credit policy depending on the Fed announcement, he says. The FOMC is expected to announce withdrawal of its stimulus measures since the US economy has started to pick up. Karwa believes if Fed tapers its bond buying programme, it will have a bearing across all asset classes.

Also Read: Inflation can't be fought with textbook approaches: Kamath

Karwa believes 5,200-5,300 is the level where market finds its natural support in terms of fundamental valuation itself and around 5,850-5,900 the market seems to be fairly priced.

Below is the verbatim transcript of Krishna Kumar Karwa & Sushil Kedia's interview on CNBC-TV18

Q: All eyes will be on the two big policies next week both local as well as global. Just wanted to get a sense from your end on which policy is the market watching out for more keenly and which is the one policy that has the ability to derail the market?

Karva: I think the market is looking at both the policies very closely because at the end of the day in the sense that how the US Fed decides tapering if any and the quantum of tapering etc will have a significant bearing on all asset classes across the globe. We also would be very much looking up to that event very closely.

Having said that, that is the key reason why the credit policy which was earlier expected to be on September 16 has got shifted to September 20 now. So I am sure the Reserve Bank of India (RBI) governor also will be closely watching the policy pronouncements over there and fine-tuning the credit policy that we will have. So I think the markets overall and India at least is looking at both the events very closely and that will be a deciding factor in the next week.

Q: The moot point of last week was that the bulls at any point in time did not give up on this uptrend, in fact by the end of the week, we still manage to hold on to that 5,850 zone, what is the sense that you are getting, do you think this pullback will continue?

Kedia: No I am very suspicious of this pullback, you have used the right word, it is a near-pullback so what if it is so huge. The later part of our conversation I would like to quickly bring in all the key global charts, all of them are poised at a very important point of inflection, all of them together. All currencies, all equity markets and this event this time unlikely the way a similar event has been coming in regularly is of not such a lower significance, I think the markets are going to move very big as this event uncoils and it is likely that they are all going to be sliding down.

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