Market really doesn't care about 2G case right now: Tandon

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It was a defining day for the Indian telecom space. The Supreme Court cancelled the 122 2G spectrum licences granted in the tenure of former telecom minister A Raja.

The SC noted that the licences were issued in a "totally arbitrary and unconstitutional" manner. The apex court directed regulator Telecom Regulatory Authority of India or TRAI to make fresh recommendations on allocation of 2G licences.

It has directed the government to allocate spectrum through auctions within the next four months. Uninor, Loop Telecom, Sistema Shyam, Etisalat DB, S Tel, Videocon, Tatas and Idea are the operators who have lost licences.

The market took the Supreme Court verdict in their stride. The Nifty adds another 30 points, stocks of Unitech, Reliance Communication and TTML slide but Bharti and Idea make smart gains.

According to Sudarshan Sukhani of s2analytics.com, the trade remains the same. "We are still higher than where we were yesterday and even if we were not the markets are having strong upside momentum. So the trade is that either you have long positions, in which case you hold them."

Sukhani sees markets remaining choppy, which means, we will be seeing volatile moves-both up and down. But, he said, the down moves will not be significant enough to stop you out. "We have to accept those 50-100 point moves suddenly on the downside and if these downside moves come and the trader doesn't have a position, I would suggest that he should go long."

In an interview with CNBC-TV18, Anand Tandon, CEO, JRG Securities and UR Bhat, MD, Dalton Capital Advisors, spoke about all the day's market action and the road ahead.

Below is the edited transcript of Tandon and Bhat's exclusive chat with CNBC-TV18. Also watch the attached videos.

Q: What has the market's takeaway been from the 2G ruling, both in terms of the perception from market's point of view and with respect to individual stocks?

A: It's a little early for the market to even have a view. I don't think they (market) particularly care right now. There is just too much money flowing in so why bother? Just go along with the trend (is what market is thinking). What it can mean is quite a lot of things.

First of all, I don't believe that it will just go away. There is more than an even chance at this stage that there will be a request for a review. If nothing else, the government can also come and make a rule. After all the Supreme Court interprets the law, it doesn't actually create the law, or at least, largely it doesn't. But you can't just simply assume that the problem has been solved or the issue is completely out of the picture.

The other impact that is a little more difficult one to fathom is what it means for both cash flows as well as pricing. Assuming that the ruling stands as it is, then first of all, a lot of companies will have to cough up a lot more money, which is good for the government in the near-term. However, in the longer-term for consumers it means that status as the lowest cost telecom country may not last for too long because if there is lower competition and people have to more, it is unlikely that prices can remain where they are.

That is the longer-term negative for the economy.

Q: What's your sense of the market now? We have had a big rally, liquidity is still strong. Do you see more upside?

A: It is very difficult to call to take because you are talking of really about the global markets here and nothing that we like to think about is happening in India is actually making an iota of difference.

Market has been all that great for companies that have come out but that doesn't matter.

Q: Do you expect to see more in terms of legs to this rally?

A: We have a very strange situation where, for example, the ECB now is pretty much like the US Fed, where it is holding assets, which have no value. In the last one month alone, the French banks have issued four times as many as the bonds as the ECB had at the end of December and these were all unlisted bonds, which have been held by the ECB against which they will lend to the French banks.

In other words the bank, which is defunct, issues a bond as collateral for borrowing from the central bank and the central bank actually gives the money to the borrower. Pretty much that means that you have no collateral at all, but nobody is questioning the central bank right now, so it continues. The amount of money that can come into the system like this is as much as you want because it's a giant Ponzi scheme. You can print as much money as you like. So it's very difficult to say that it had stopped.

All I am saying is that I don't expect that the Greece issues default anytime soon in a satisfactory manner on it. If it does end up with a haircut of 50% I don't see any conceivable reason why the Spanish or the Irish or any of the other PIIGS country citizens will not demand a similar treatment and therefore I don't know where this all will end in the near-term.

The short answer to my rather long winded question is liquidity can continue to grow without any precedence.

Next page: UR Bhat Q&As