Crude party won't last long, says Anand Tandon

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Crude party won't last long, says Anand Tandon

While oil prices saw a rebound in the trade after International Energy Agency’s decision to tap emergency reserves, Anand Tandon, CEO of JRG Securities says the good news will only be short-lived. “Reduction in crude prices is a temporary phenomenon,” Tandon says in an exclusive interview with CNBC-TV18.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Larsen BSE | NSE 30/05/12 Are Mutual Funds betting on Larsen? Other Stocks in this news GVK Power & Infrastructure | Lanco Infratech | GMR Infrastructure | IVRCL Assets and Holdings | Reliance Industries |

While oil prices saw a rebound in the trade after International Energy Agency's decision to tap emergency reserves, Anand Tandon, CEO of JRG Securities says the good news will only be short-lived. "Reduction in crude prices is a temporary phenomenon," Tandon says in an exclusive interview with CNBC-TV18.

The crude prices fell by 6% as IEA announced to inject 60 million barrels of government-held stocks in the global market. The world supply immediately increased by around 2.5% for the next month. Tandon, however, holds the lowering of commodity prices as a much more positive trigger for the market movements. ( Here's more on the oil slip )

With a series of upsets coming from bad set of economic data from US, Tandon says the global markets would continue to 'influence the triggers for falls in the Indian market'.

Speaking on the stubborn inflation, Tandon believes the central bank would go for an additional interest rate hike over the next three to six months.

Picking on the sectors, Tandon is bearish on the FMCG and the pharma space. He however is bullish on frontline companies over the long term.

Below is a trancript of Anand Tandon's interview with CNBC-TV18. Also watch the accompanying video.

Q: The fundamental analysts believe that around 5,200 levels could be some support but the technical analysts talk more about 4,700-4,800 breakdown. Which do you think is the higher probability event?

A: The technical analysts have my vote. We have been arguing if one should really go out and buy, however, you need have to have something at that level for the index to be interested in the market. The overall global situation and the earnings growth also affects the domestic market. Therefore, if you have a market which has no reason to go up then the chances are it wouldn't fall.

Q: You wouldn't take too much heart from what happened with the IEA and the fall in crude over night?

A: The fall in crude was more a reaction to what the US government has done. They have dipped into their emergency reserve and sold 60 million barrels.Crude has fallen because they have sold and therefore it will continue to be somewhat soft because of the market action. On the other hand, one could argue that you have to dip into emergency reserves because you don't see it falling on its own natural steam. We haven't seen the rest of the oil producing countries actually get in and increase the production, therefore, it leads you to believe that perhaps they cannot fall, which is not good for very longer-term equities.

Q: The EGoM meet is to happen today, what do you expect to hear on oil?

A: If the newspaper reports are to be believed there will be a rise in prices. There is some debate now on the fact that it is not a subsidy sector and an over taxed sector. The government is doing anything great in terms of subsidizing the consumer. It is not able to control its own expenses and therefore, it is over taxing that sector. The finance ministry should give up some of its taxes and in straight shift to more tax level which will automatically reduce the pressure on the oil companies.

In the near term the oil company should benefit from the possibilities of increase in prices. The US action is depressing for the crude for the near term.

Q: Do you think some duty cuts will come in? If there are some price increases at the retail level would the market frown about inflation or do you think that is expected and in the price?

A: Inflation has become a worry and there will be an area of some concern. For those who are more bullish on the oil refining companies, it remains a trading bet. We do not know how much the government will actually let them make money; however, they will allow them to not bleed. There is not much upside from the point of view of an increase in price vis-à-vis the stock market. There can be a downside from the inflationary aspect of it.