Interest rates, divestment programme key drivers now: Enam

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS See significant inflows in high beta EMs: Macquarie Sec Investors cautiously optimistic on India: BNP Paribas 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 Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

 

Q: Any thoughts on some of these natural resource stocks because that is the space which is beginning to liven up by way of pricing potential?

 

A: In India there is a lot of volume plays in natural resources. There is a lot of mining happening, there is a lot of plants being set up. If you look at the Sensex and Nifty EPS, a lot of it is being driven by oil and gas and metals. The problem that I see is only the great uncertainty of what happens to the global growth because that affects metal prices.

 

Q: Is there any headwind that you think in the first half of the year where you are not quite that sanguine which could knock the Nifty or the Sensex back below 15,000 to 14,000 kind of levels, because some people are waiting for that dip to buy into and then make money second half of the year onwards. Do you think they will get that dip?

 

A: It is possible if the rupee equivalent of crude oil prices goes up substantially. It could happen, it may not happen that is the major risk to India. That could happen in a variety of ways which is basically crude oil going up on its own or in rupee terms because the dollar goes up. There is no solution, but there are signs that Yuan may appreciate. There are signs that the euro zone may sort itself out, all these will lead to the dollar going down which is good for India because the INR goes up. That is one of the primary drivers of capital flows in the short-term.  As far as we are concerned, what is more important to us is the INR-dollar rate relatively. So if the world doesn't do too well, it is not a big deal for India but if the dollar goes up, because of the risk aversion, that is what affects India.

 

Q: Any fears of an earnings strip up over the next couple of quarters because Q3 wasn't exactly best of breed by way of performance?

 

A: I think the main fear is what will happen to local interest rate. Our call is for an average of 8% next financial year. There are some in the camp who feel that the RBI can if it wants to let interest rates go far lower because it is auctions and stuff like that using various tools. There are others who believe that the global forces and the lack of the government to be able to pass on subsidies will lead to interest going up. You have to wait and watch, but I think interest rates is one of the fears over the next one quarter.

 

Q: What would be your key underweights now - I presume from what you told us earlier that you will not take large bets on infrastructure till the second half of the year when the capex cycle picks up; but any outright underweights?

 

A: Metals is still an underweight. Infrastructure like power, roads - I don't think that should be too much of a problem. The problem is in corporate capexm, industrial capex, oil and gas and things which are dependent on global factors. What is demographic in India like power, roads, I don't think there should be too much of a problem there.