CRR cut precursor to rate cut in March: IIFL

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Reserve Bank of India's move to cut CRR is a precursor to rate cut , which should come in March, said Nirmal Jain, chairman, IIFL.

In an interview to CNBC-TV18, Jain said, "Our research had expected this and they are saying, interest rate in this year can come down by 200 basis points."

If rate cuts happen ahead, they will aid the beaten down banking and infrastructure stocks. Apart from that IT, FMCG and pharma are also likely to get investors attention ahead, he added.

However, he said suggests that one should be cautious because problems in Europe can resurface. "From now on it will be more stock specific, more sectors specific," he said.

Below is the edited transcript of Jain's interview with CNBC-TV18. Also watch the accompanying video.

Q: Warranted this move on the index today because of what came through on the CRR cut?

A: Yes. That is right. Even RBI's track record is a bit of a pleasant surprise for the markets because there were two views and there was apprehension that RBI may not do anything. This is a very positive move. Our research had expected this and they are saying that interest rate in this year can come down by 200 basis points. This is just a precursor to rate cut which should come in the month of March, so market is turning bullish.

If all these infrastructure companies are able to now get their debt restructured. Then this will a case for turnaround because many of them are have been reeling under very heavy interest burden. People are also expecting that after UP elections, government will be able to push through some reforms, so the entire environment has turned little positive.

Globally, Europe problems for the time being are pushed backward and there is some temporary relief. Today markets might have started little subdued, but in the last few days we have seen that markets have rallied very strongly. The whole sentiment has changed and is looking much positive now.

Q: How much more would you give the market though, some people are pointing out that we have seen these kind of 10-14% rallies before- in this current up move where do you think the Nifty can go?

A: One has to be cautious because I do not think globally we are out of the woods yet. There are problems in Europe which can resurface. Back home also we will have macro data which may not be very pleasing like the GDP and the other numbers. One has to be cautious. But was a panic kind of a situation and people were thinking that we will get into a bear market, that has receded and that is not the fear now. From now on it will be more stock specific, more sectors specific.

These CRR cut and if the rate cuts if they follow they will definitely and directly help banking sector and infrastructure. Those stocks have beaten down a lot, so most of the investors will look for some investment picks there. We should also look at IT sector, although the rupee has started appreciating but that sector also holds some more steam for next two-three years. This is because the rate cut will not help the current account deficit as much so rupee will stabilize around 50/$ and maybe in the range of 50/$ to 52/$. So, IT is one sector and other than that domestic story like FMCG and pharma they will also get investors attention as we go along.