Pankaj Vaish, head South Asia markets, says that markets need a small catalyst or some one in the government to read charts. It is at a cusp where one or two meaningful steps would get a stampede.
Pankaj Vaish, head South Asia markets, says that the market needs a small catalyst or some one in the government to read the charts. The market is at a cusp where one or two meaningful steps would get a stampede.
A lot scepticism is still there in the market and the weak macro conditions are not helping, feels Vaish. However, this has not led to complete selling and people are hedging their portfolios, he added.
As the Nifty scales higher, Vaish believes the next technical level for the index would be 5600.
Below is the edited transcript of his interview to CNBC-TV18.
Q: What do you hear around you disbelief and skepticism about this stealth rally or have people enjoyed it?
A: We still see a lot of skepticism. I think people are still scratching their heads, there was a lot of misguided anger in a sense. We were all frustrated with the way things were developing, the macro was developing and lack of policy action. But, I think you never want to confuse what my first year trading guru used to tell me. He said, never confuse your emotions with your portfolio and I think people sometimes make that mistake.
You show your anger by saying I am not going to invest in this country. But the fact of the market is that market doesn’t know that you are not invested, it doesn’t care. You have to stay calm and rationale.
I think the negativity had gotten quite extreme. The last time we spoke at Citi conference right at the beginning of June, the markets were just above 4,850 or thereabouts and macro obviously has been a problem. But I think at some stage, this is the theme we kept repeating that the valuations will have to come to the fore, you have to start analyzing companies, fundamental by fundamental.
The good thing that has also happened is globally the correlations have broken down. People are making distinctions between the asset that they are investing in and there is some fatigue of this whole Greece exit issue. Nobody sells off in a lockstep manner just because there is some bad news out of Greece. You can see the S&P 500 is about 8% from its all time highs before Lehman crisis and many other stocks have hit all time highs. Even the Indian equity market is up about 12% from our June conference.
I think there was too much skepticism, there still is a fair amount of skepticism. The only good thing you can say is people didn’t sell enmasse, they didn’t say okay get me out. They did put on a lot of INR hedges because last year a lot of portfolio managers got burnt in forex. This year we saw some of that, we also saw exporters hold back on not selling because of the cancelling and rebooking ban that had been put in place.
Now that is partly lifted with 25% and that is doable. I think the makings are there, perhaps for a further move up in the markets and perhaps for some appreciation of dollar-INR.
Q: How much more do you think in the near-term is possible in the Nifty?
A: Technically, I guess 5,600 is the next level. From there for it to breakthrough further will require some real steps. I think it will require either something on fiscal or ironically, if the gross domestic product (GDP) print were to come below 5% for this quarter then I think the pressure will be quite heavy on the Reserve Bank of India (RBI) to do something, perhaps even in the September policy meet.
We think that they will want to delay it further because they will want to see a little more results come through on the inflation readings but even 4.9 will be a massive sticker shock.
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