Mkt may be unhappy if RBI focuses on inflation: Nilesh Shah

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Mkt may be unhappy if RBI focuses on inflation: Nilesh Shah

Now that third quarter earnings of some of the major companies are announced, the market is eagerly waiting for the RBI’s credit policy review expected tomorrow. Though there are whispers of a possible CRR cut, Nilesh Shah of Axis Direct is confident that the market will not be disappointed if RBI does not reduce it.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » 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

Now that third quarter earnings of some of the major companies are announced, the market is eagerly waiting for the RBI's credit policy review expected tomorrow. Though there are whispers of a possible cash reserve ratio (CRR) cut, Nilesh Shah of Axis Direct is confident that the market will not be disappointed if RBI does not reduce it.

In an interview to CNBC-TV18, Shah said that the market is looking towards some sort of comments from RBI as to how they will manage liquidity and how they will balance inflation and growth.

However, he warns that the market may be disappointed only if the RBI shows worrisome signs. "If they give proper focus on both growth as well as inflation and which is what they did in the last credit policy also than market will not be disappointed," Shah added.

Meanwhile, the other big mover of market is Reliance Industries ' dismal third quarter performance. Contrary to most experts, Shah feels that the buyback will support stock price and it is likely to restrict downsides in RIL from hereon.

"Earlier it was kind of underperforming the market by a reasonable margin over last one whole year, now with the buyback a kind of floor has been set for the share will that result into share price going up," he explained.

Here is an edited transcript of his comments. Also watch the accompanying video.

Q: Are you expecting big fall in Reliance or do you think the buyback will cushion the fall?

A: I think the kind of magnitude of buyback and the price which they have announced will support the stock price. Earlier it was kind of underperforming the market by a reasonable margin over last one whole year. Now with the buyback a kind of floor has been set for the share will that result into share price going up.

I think that will depend upon how the business performance in terms of petrochemical margins, refining margins and gas production but will the stock fall like a stone I think with buyback that will stop.

Q: The bigger trigger is the policy tomorrow. What are you expecting from a stock market perspective?

A: I think the market is expecting a status quo, no rate cut on CRR or repo side. The expectation is that RBI will still give a signal towards managing liquidity which is running pretty tight. It is expected to become tighter as we move forward into this quarter. So, people will be looking towards some sort of comments from RBI as to how they will manage liquidity and how they will balance inflation and growth.

Q: While a repo cut is not expected, there are still a lot of people who are holding out on expectations of a CRR cut. Do you think there is any room for disappointment on expectations that have been priced in?

A: I think the disappointment can come only if the RBI says that look we are still bothered about inflation and inflation has not come down as much as we would have loved but if they give proper focus on both growth as well as inflation and which is what they did in the last credit policy also than market will not be disappointed.

There is a small segment of market which is expecting a CRR cut and probably majority of the market is praying for CRR cut but if RBI can convince that through some mechanism they will manage the liquidity be it open market operations, be it Forex intervention than probably non CRR cut will not disappoint market, the problem is liquidity not with CRR cut.