SENSEX NIFTY
Aug 07, 2013, 12.06 PM IST | Source: CNBC-TV18

Do not see huge mkt sell-off unless FIIs exit: Religare Cap

Tarun Kataria says despite all the negative macros, foreign investors have not been major sellers as that might kill both the market and the rupee and FIIs do not want to risk these factors as they have kept market buoyant.

Tarun Kataria, CEO Religare Capital Markets expects GDP growth to fall to 4 percent sometime this year as India is in a multi-year economic down cycle and it is very hard to reverse the slowdown over a 2-4 month period.

Also Read: No magic wand to deal with economic woes: Rajan

Speaking to CNBC-TV18, Kataria says, despite all negative macros, foreign investors have not been major sellers as it would kill both the market and the rupee and FIIs do not want to risk these factors as they have kept market buoyant.

“I don’t necessarily see a massive sell-off from here unless the FIIs decide they want to exit the door in which case who knows where the bottom is,” he adds.

Below is the verbatim transcript of Tarun Kataria's interview on CNBC-TV18

Q: Your brokerage is among the most bearish in terms of its gross domestic product (GDP) expectation for this year, given that do you think there is more damage possible to this market?

A: I think there is more damage possible. We are on a cycle that is very hard to reverse over a 2-4 month period and then one can see a material down graph in GDP growth over the last couple of years. There is nothing that can come in the way to say okay this thing will now turn whether it is interest rates, industrial policy, FDI reforms, power and all the usual stuff that we talk about but nothing has changed.

We are the only firm now that has a formal sub 5 percent GDP growth number for fiscal’14. We are saying sub 5 percent but it is likely to be closer to 4.5 percent. My personal view is that either this quarter or the next, one might actually see a number close to 4 percent.

Q: What are you hearing from your clients because despite all the negative macro news, foreign institutional investors (FIIs) have not been major sellers, what would you attribute that to?

A: FIIs know it is a very narrow funnel and to exit at this point of the cycle will kill both the markets and the rupee and they do not want to take that risk and that has kept the equity markets buoyant.

But as Yashwant Sinha was eluding today, the macro environment continues to deteriorate. We thought about what the implications of bounce of payment crisis is in the next 24 months and that is something that the new Reserve Bank of India (RBI) governor needs to get his head around quickly because we are staring a crisis in the face.

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