May 14, 2013, 07.16 PM | Source: CNBC-TV18

Cash out of FMCG, banks; rupee key to FII flows: Religare

Tirthankar Patnaik, EVP, institutional sales, Religare Capital says the brokerage house is booking profit in FMCG companies and private banks.

Broking firm Religare Capital Markets is looking to book profits in shares of FMCG companies and private banks as they have run up quite a bit in the recent rally.

"Market's movement since the first week of April has been incommensurate with other emerging markets. At 6100 levels we will be booking profits in some sectors, which have done meaningfully well," said Tirthankar Patnaik, EVP, institutional sales said in an interview to CNBC-TV18.

Also read: April WPI inflation seen lower at 5.4%: CNBC-TV18 Poll

On the economic front, he said that surge seen in gold imports in April came as surprise as the street was expecting a muted number. Gold and silver imports in the month were up by 138 percent to USD 7.5 billion last month compared to a year earlier, pushing up trade deficit for April to USD 17.8 billion.

According to Patnaik, the market is not too worried about the political situation in the country, but it will be closely watching global macro data.

Meanwhile, given the weakness in Indian currency, one can the expect market to see some more profit booking unless the rupee improves, he added. Religare sees the rupee in 53-55/USD range now.

"Dollar has strengthened against all major currencies, specifically the Yen, which has led to weak rupee. For a long only investor to put incremental money into India at this point, the return from equities would have to compensate the depreciation of the local currency as well. So that acts as a roadblock for the markets performance,"he explained.

According to Patnaik, the Maruti stock may get support from a falling yen, but is unlikely to see a meaningful growth in volumes.

Below is the edited transcript of Patnaik's interview to CNBC-TV18.

Q: Would you say it is time to take profits in the Indian market after the recent rally given some of the recent macro data points that have cropped up?

A: Market’s movement since the first week of April has been incommensurate with other emerging markets. It is not just India that has done well. We will be booking profits especially in some sectors which have gone meaningfully well. Consumers will be one sector that we will be taking profits out of. Private banks will be another sector we will taking profits out of.

Q: There is some nervousness around both what came through on the macro figures yesterday as also the flux on the political situation. How much do you think that is weighing on the sentiment or performance and would that be cause for the market to move lower you think?

A: On the macro, gold imports were clearly a surprise. A lot of analysts had pointed to a fairly muted gold import number. Numbers were expected to be not more than about USD 4 billion at max. They came in at much higher than that USD 7-7.5 billion.

Numbers were up about 130 percent odd. That was clearly a big negative which actually marred the trade deficit numbers. If one takesout gold imports, growth was just about flat, about 0.7 percent or so compared to exports growth of 1.5 percent.

Gold was the key negative there. On politics, I do not think the market needs to be concerned there. We are not of the opinion that the Congress would take risk of having a new Prime Minister at this point. We do not think the lead opposition is in a position to challenge the government at this point. So, we will attach low risk, low weightage to a political event happening here rather than a global macro.

Q: Do you see the rupee as a problem for the stock market now with the recent trade data? Do you think the case for the rupee to now hover around 55 has gotten stronger and that may restrict capital inflows?

A: Yes. The rupee has always moved in tandem with the markets over the last 20 odd years. Whenever the rupee moves in any one quarter, the index actually follows. What has been happening in this particular rally is that rupee has strangely remained fairly weak and that is fairly counterintuitive.

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