Manappuram surge on; invest in growth, not scams: Experts

Meanwhile, BSE and NSE member Dipan Mehta reveals that investors should avoid knee-jerk responses whenever a company with sound performance and fundamentals is embroiled in a controversy or scam.

Below is an edited transcript of Dipan Mehta’s analysis on CNBC-TV18.

Q: How long do you think the mining ban in Goa will continue and where do you see mining stocks stabilising?

A: That's a very difficult question to answer. Only someone in the government can tell you how long the mining ban will last. But, by and large, I think it is best to avoid sectors where there is excessive interference and regulation by government. So investors could best avoid companies in mining, power or even telecom sectors.

Q: Do you think the headwinds with respect to the global markets are behind us after the ECB ruling or are there potential land mines in the form of the German Constitutional  Court's ruling?

A: It is obvious that the Indian market is driven by sentiment in the global markets and our FII flows are directly linked to how the international markets perform. So if those markets continue to soar, then I think that it will result in a feel-good effect in India as well.

Notwithstanding the various macro-economic problems, our markets have been trading at current levels thanks to the way the DAX, the CAC, the FTSE, the Dow and the Nasdaq have been trading.

Now events like the court ruling are extremely difficult to predict and they can go either way. But I think that that could only be a bit of a minor setback because eventually what is important is that all the leaders in Europe are showing resolve to save the euro and the European union.

So if at all a negative court ruling comes, I think that the setback would be temporary and the EU will work around it to ensure that all the various programmes can be implemented.

I think what is more important than the German court ruling is the Fed monetary policy because there is increased expectation on the launch of QE3 regarding which the Fed has been sending out indications. If the QE3 does not come through, then there will be some kind of cap placed on the local and international markets.

Q: How do you see the entire process of fuel price revision playing out and the probable impact on the markets?

A: I think the markets will perceive the hike to be extremely positive. The single most important factor that is restraining the markets is the fear of fiscal deficit which is already at 6.1% and will surge ahead unless the government takes some action. The second level of restraint is the threat of a downgrade by credit-rating agencies which has exhibited its adverse affect on investor-sentiment on more than one occasion.

The situation could also improve if the government outlined a road-map to improve the economy, then the market sentiment would be better. I am surprised that the markets have stabilised at these levels despite the fiscal deficit and government inaction and there is a lot of appetite to buy stocks at lower levels. We have seen a considerable amount of volume price action in midcap stocks as well, with several new stocks hitting 52-week highs from time-to-time.