Global mkts to be ranged on mixed economic data: Blackstone

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Q: The one thing that has worried the markets here is the way the bond yields have shot up to 7% plus particularly since the budget and there is the fear that may be the interest rate cycle has bottomed out and is that a reason for concern in your eyes for the equity market?

A: I think yes that is a worry but that is more to do with the fiscal deficit and the crowding out by the government borrowings, crowding out of the private sector. So I think that is one risk to the India story, which is why we think that if yields go up too much, I am sure the government will do something to counter some of that crowding out effect. They might at that point announce some divestment or something else; we don't know what it would be. But I think inflation has definitely come off quite a bit and the government has already made noises this time around if inflation starts to rise, they would be more active in terms of managing monetary policy. So could interest rates be headed higher? - They could if inflation also picks up. 

Q: Would you structurally remain positive on the India financials stocks or Indian bank stocks or has your view changed over the last few days because of what is going on in the bond market and with interest rates?

A: I think the banks had moved up a lot in anticipation of divestment, particularly the PSU banks which we never really expected to happen anytime soon. I think there are pockets of growth and credit growth will probably remain strong, the credit growth will continue. I can't tell you due to compliance reasons what our view is on any one sector at the moment and what our portfolio strategy is. So I would probably stop at that. 

Q: The other tactical point which people are talking about is maybe the high beta sectors which led the rally over the last 3 months that trade might have played our and now defensive sectors like FMCG, auto, pharma might once again start out performing - would you agree with their assessment or do you think you should not write off high beta sectors yet?

A: It will be very company specific I think and also liquidity is an important factor. I think so definitely there are strategists that are suggesting that strategy to be followed. But there are some strategist that are saying that if  valuations come down enough on some of the other companies, the high beta names perhaps it's time to accumulate those again.

Q: So where do you think we are with the stock market now? Did you think that this was a start of a big trend, a bull market of its own; did you think it was a bear market rally and if you thought it was an uptrend, do you think despite the mild wobble of the last few days that trend is still in place?

A: It doesn't matter whether it's a bear market rally or a bull market rally. It was a rally, that's the first point. But were the fundamentals strong enough to call the bull market rally? - Probably not. The fundamentals didn't justify it being called the bull market. But then you have to look at the short-term and long-term. In the long-term I think India still is a very good place to invest for those who are patient long-term investors specially after we have had a stable government who is committed to trying to deliver 9% GDP growth, whether they will be successful at getting to 9%, they might get to 7-8%, in the current environment that is still pretty good.

So over the long-term, it's all about time horizon. Over the long-term I would say India is a great growth story. Over the short-term has the market run quite sharply?-yes it has. Was the market valuation factoring in a very dramatic budget?-yes. Was the budget dramatic?-no. So, is the market likely to correct?-possibly, specially if the global markets are correcting.