Jignesh Shah, Head of Equity at ABN Amro Private Banking India believes that markets will not get into lower bottom situation once again. He feels that there could be a possibility of bounce up on Nifty and advices to maintain the discipline of strict stop loss. 

According to Shah, going forward the focus for most of the central banks would be specifically on growth prospect and they may start talking about rate cut rather than the rate hike towards the end of this calendar year. He believes that inflation may cool off but will still remain in double digits. He said, “We are very much towards the peak of inflation and interest rates have already started softening. So putting all these prospects together, it makes sense to start looking at market from the investment perspective.”

Excerpts from CNBC-TV18’s exclusive interview with Jignesh Shah:

Q: What do you make of this market? Would you say that there are more of lows to touch considering the kind of macroeconomic data that we are getting? Would you say that even 12500, the low that we have seen in the past two months could be challenged?

A: It looks most unlikely at this juncture because a couple of factors have turned positive. Crude has gradually started coming off and has come off with good momentum on certain days. Inflation data has started showing declining trend specifically for last two weeks. So, these two factors have made it a more positive environment. There is correction mainly because of global cues. It has made a higher bottom from 12,500 to 13,700 and then 14,100. It’s most unlikely that it will start getting into lower bottom situation once again.

Q: Do you think that this current fall of about 100 points for Nifty presents an opportunity for a medium-term trader to take a punt and buy at these levels?

A: If it’s a trading call, then one needs to maintain a strict discipline of stop loss. There could be a possibility of bounce up and the way it has opened with a downward gap, in the next few days one may find it open with an upward gap. But, one should maintain the discipline of strict stop loss.        

Q: A lot of market experts believed that once inflation starts coming down or shows signs of coming down and once it becomes reasonably clear that Reserve Bank of India (RBI) is done with its rate hikes, the FIIs (Foreign Institutional Investors) would take a positive view and would start coming in.  Do you think that the return of this kind of money is round the corner or they will start waiting for the first signs of growth rather than the first signs of inflation?

A: Commodity prices are correcting globally - starting with crude oil; even metal prices have corrected from their peaks significantly. Most of the Central Banks have shifted their stance from inflation to growth as growth becomes a major concern. Yesterday’s data of jobless claims going up in US suggests that the problem is shifting from credit market to housing market and now housing market to the labour market. So, going forward, the focus for most of the Central Banks would be specifically on growth prospect and that is where the European Central Bank and Bank of England maintained status quo on interest rate yesterday. They may start talking about rate cut rather than the rate hike towards the end of this calendar year.

Within this scenario, the situation is now improving from the perspective that inflation is already coming off. The in-house view is that it would still be intermediate till the end of calendar year. Within the inflation data, there is a possibility that prices may see some kind of dip because that has not yet being readjusted. So if that happens, then inflation may cool off but will still remain in double-digit inflation. On an extreme higher side, it could be 13-14%. We are very much towards the peak of inflation and interest rates have already started softening. So putting all these prospects together, it makes sense to start looking at market from the investment perspective.