Sep 12, 2013, 10.08 AM IST | Source: CNBC-TV18

ETFs now investing in India; bullish on cement: ICICI Sec

Foreign funds are investing in India through ETFs, but one is not seeing much of stock specific buying, says Anup Bagchi, MD and CEO, ICICI Securities.

Anup Bagchi, MD and CEO, ICICI Securities says lot of exchange traded funds (ETFs) are now seen investing in the Indian market.

"They are increasing exposure to India and most of the flows come through global allocation, emerging market allocation and that is driving the prices up. This is why the top 10-20 stocks are moving up much more rapidly than the others but it is a very good sign," he told CNBC-TV18 in an interview.

Meanwhile, Bagchi believes the deal between JP Associates and Ultra Tech is good as these two companies that are highly leveraged will now be able to sell and can deleverage to raise capital. He also mentions that cement sector is a good buying opportunity now.

Below is the verbatim transcript of Anup Bagchi's interview on CNBC-TV18

Q: In the last one week people have been recommending a buy on every dip but do you think there could be a base building at these levels and the Nifty is heading higher?

A: At ICICI Securities we have always said that it doesn’t matter what the level of rupee is because it tries to stabilise somewhere. We have also maintained that the foreign institutional investors (FIIs) money will come in because if you look at it from an FII perspective then stocks have corrected quite a bit and on top of it if you put the rupee correction then they are available at 50 percent of the prices and are value buying and to that extent, money was to come.

However, at this point of time we do not see much of stock specific buying but a lot of exchange traded fund ( ETF ) money is coming. This is because they are increasing the exposure to India and most of the Indian flows come through global allocation, emerging market allocation and that is driving the prices up. This is why the top 10-20 stocks are moving up much more rapidly than the others but it is a very good sign.

Q: What is your sense on the JP Associates and Ultra Tech deal, is it a win-win for both, how will ICICI Securities approach these two stocks?

A: It is a fantastic deal for two reasons. One, we have a situation where there are two companies, which are otherwise very good but are extremely leveraged. While the other companies which are looking for expansion and have cash on the balance sheet and so, the marriage of two is very good.

We also see a lot many people and lot many promoters coming out and trying to shed their assets to shed the leverage. It will be a big start of the base of the bull run again because if you are very leveraged then your headroom to do anything more is very restricted. However, there are very few buyers in the market now and on the private equity side which has put in a lot of capital in 2006-2008 their exits haven’t been spectacular and to that extent, as a source of capital, it is restricted.

We know that primary market as a source of capital is restricted. Now, we are talking of large corporates, some of the multinational companies (MNCs) who are sitting cash overseas and that is coming in and putting in capital and so, I think it is a very good deal.

Q: When you say that you see more deleveraging, are you referring only to cement?

A: No, across sectors. It is essentially groups that are fully leveraged and have assets which they can sell and can deleverage because you are unable to raise capital otherwise. So, it is a good start and is very encouraging.

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