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Mkts to fall irrespective of what budget delivers: IL&FS

Published on Fri, Jul 03, 2009 at 09:42 | Source : CNBC-TV18

Updated at Sat, Jul 04, 2009 at 19:22

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Vibhav Kapoor of IL&FS said the global market scene was dismal and so the Indian indices would fall in two to three months irrespective of what the budget has to deliver. "India has outperformed almost all the global markets like 25-30% which means a lot of pricing has been done in. So I think after the budget is over and maybe two-three days after that probably the budget will be forgotten and you will so back to global trends."

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Here is a verbatim transcript of the exclusive interview with Vibhav Kapoor on CNBC-TV18. Also watch the accompanying video.

Q: How is the market going into the budget you think with expectations or not too much has been priced in?

A: I think a lot has been priced in, in one sense. After the elections the market jumped 25% or so and held on there for the last one and a half months. That 25% jump itself is factoring in a lot of things. It is not only factoring in a stable government but it is also factoring in a good government which will carry on the reforms process and also be more market friendly and more friendly towards investors. So to that extent a lot has been priced in but over the last few days or let us say for the past couple of weeks I think there has been a little bit of hesitation. The market is a little worried about whether many of those expectations will come through or not. So in that sense it is a mixed picture but I think overall a lot of good things have been priced.

Q: In that case is there a possibility the market sees a sharp sell off if the budget is not upto the mark or not upto expectations?

A: Yes, that is always a possibility. But I think the real issue here is that India has outperformed almost all the global markets like 25-30% which means a lot of pricing has been done in. So I think after the budget is over and maybe two-three days after that probably the budget will be forgotten and you will so back to global trends. I think one issue here is that the global trends are looking pretty weak and we are almost at the end of the global rally which has been going on for the past two-three months. There is too much of optimism priced in the global market about the global recovery. So what I see is fairly long sort of downtrend in the global markets and therefore India will follow that. It could outperform in the sense that it could fall less than the global markets do if the budget is very good and if the government goes ahead with a lot of the reforms that the market is expecting and if the budget is not so good then maybe we will not outperform and we will just go along with what the rest of the world does.

Q: What did you make of the changes in the oil price and how the market reacted to the various stocks - how would you position yourself in that sector now?

A: It looks good in the sense that the government has sent out a signal that beyond a point they do not want to carry the burden of the oil subsidy. If oil prices go beyond USD 75 per barrel then I do not think the government will be in a position to further increase prices of petroleum products. Also I think it sends out a signal that the government is serious about reigning in the fiscal deficit and not letting it go haywire completely. So it has got a lot of positives for the petroleum sector as a whole and it is a step in the right direction.

Q: If you do sense a bit of a sell off coming tactically how would you approach it - do you think the best in terms of a rally is behind us or is that the buying opportunity people have been looking for?

A: I think that is exactly the point I think the budget is going to become largely irrelevant in a weeks time and people are going to forget about it. Now let us assume the budget is good, it meets most of the expectations of investors. You could get a day or two of rally from here but since most of that has already been priced in maybe you go back to 4500-4600 and thereafter then you start following the global markets. As I said earlier, I am pretty bearish on the global markets. I think we have seen the best of the rally. The rally in the global markets is just getting over and I think we are in for a very proactive declines in the global markets so given that I think a target of 3500-3700 on the Nifty in two-three months time irrespective of what the budget does is very much on the cards.

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