Mkt may stay put or move higher until Budget: JRG Sec

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Anand Tandon, chief executive officer of JRG Securities spoke to CNBC-TV18 about where he sees the market heading now. 

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

Q: We have had a big run, any chances now that the market maybe cooling off a little bit or do you sense that momentum and interest is still extremely high?

A: Interest has certainly perked up quite a bit and momentum also seems to be looking for sector rotation kind of opportunities. But given the fact that the index has had an excellent run so far, I wouldn't be surprise if it does pause at least at the headline level for a little while. I think that would be quite healthy.

Q: Do you see the possibility of a deep cut in the market though between now and the union budget?

A: Between now and the budget, not likely unless the situation in Greece turns even grimmer than it was yesterday. We have already seen writing now on the streets and its likely that will increase. Also the second question is what happens to the rest of the countries that are likely to follow after Greece and whether that will also mean similar kind of sharp budgetary cuts and control by external agencies and consequent effect in terms of their social fabric. But other than that brewing up in a big way, I would think that markets right now primed to stay pretty much where it is or maybe little higher at least till the budget.

Q: And after that?

A: The expectation that is building up is that there would be a slew of reforms that will come through from the government, and the government is working hard to make sure that there are market-friendly moves. If any of them were to actually happen, then its likely that it will move up again, but I would personally think that you have maybe a quarter of time between now and the time that you will develop legs, if at all, because any policy action that they do announce will take a while for it to start showing action on the ground.

Q: How have you read the earnings performance this quarter, do you think it justifies where the market is at or on the basis of earnings we should be lower right now?

A: I think the earnings were not anything to talk about, at the same time, there wasn't that much expectation as well. So it's pretty much behind us. I think what the market is looking for going forward is all the promises that are being made in terms of lower interest rates and possibly lower inflation. I think the inflation factor is something that I don't necessarily agree with; I think you will find inflation lot more stubborn than people think. But between now and March, I don't think that the inflation number has any reason to pick up from here. So you may find that between now and March, you have a situation where inflation will look a little more benign and consequently you may have a little easier monetary stance as well from the central bank. Therefore, there is no particular reason why the market should trend down from here, besides external factors.

Q: The intangible one seems to be what comes through on elections. Given the current setup for the market do you think it's still an important cue and what kind of impact could it have?

A: Given that most of the market move has been because of fresh money coming in, we will justify it either way, so if the election results are in favour of the central government right now, we would say that's the reason for it to make reforms and therefore go up. If it is not so much in favour of the existing ruling conglomerate, then one would argue that because of that the reforms have to come through so that they can fight for the next election better. Either which way, it is the outside money which is driving it, not so much the local policies. So to that extent, the local policies are largely irrelevant in terms of the election at least.

Q: What is your sense of the kind of downside that you have for the rest of the year, do you think we formed a base in December for the market, do you see those levels being revisited at any point?

A: All possibilities are open at this stage. There weren't too many people who were anticipating a rally of the kind we saw in January, and therefore trying to predict what will happen for the next 11 months is equally hazardous. The issue that one has to look at is what is the probability that the money supply that we are seeing which is driving the market will continue and with greater force?

Like I argued in the past, if you are looking at a foreign investor, he should be taking money off the table because by now, combined with the currency appreciation that he has seen from the beginning of the year, he would have made well over 25% maybe 30%. That's as much as the Indian market can give for a long period of time. So on that logic, if the market doesn't fall, then it should remain pretty much in this range for the whole of the rest of the year.

However it doesn't seem likely, so it will probably waffle around. If you do find that the data overseas is supportive of even more movement towards emerging markets, then I would argue that right now the probability is that it may move up higher from here than lower. That doesn't take away from any of the risks that are already there in the system and at the current stage for someone to go long is a little fraught with risk because the near-term performance last five weeks have been upbeat, not necessarily likely to continue in the direction immediately.