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Published on Tue, Feb 05, 2008 at 09:42 | Updated at Tue, Feb 05, 2008 at 12:01 | Source : CNBC-TV18

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Speaking to CNBC-TV18, Munesh Khanna, Chairman, Anagram Stock Broking said that the international cues do not augur well for the markets. He thinks that the worst is behind, but the markets will remain at the current levels.

Excerpts of CNBC-TV18’s exclusive interview with Munesh Khanna:

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Q: What’s the sense you are getting on the market? There is more hope after the pull back, do you think we have seen the worst and put it behind us?

A: Yes, I think one has seen the worst, but I agree with all the other views that yes, we are going to see more dips, we are going to be volatile. We had three issues last week, we had the international markets and we had two domestic issues, one was the derivative millstone which was lying around there which is gone down substantially, and the liquidity which the IPO refunds coming in the liquidity will improve.

So the issues that we had on the domestic front last week, may not be there this week. But internationally, we continue to have not so good news. The US continues to be under pressure. So markets are going to remain, pretty much, where they are, but the worst seems to be over, at least from a domestic perspective.

Q: Yesterday was the first sign of a midcap revival, even though volumes continued to be extremely low. Do you think the worst is behind for that pocket of the market as well?

A: If you look at the statistics, we had only 160 stocks on the lower circuit yesterday, which is lowest. For the last couple of days we have had 800-900 stocks, so yes, there was lot of force selling by brokerage houses on behalf of their clients. People had leveraged positions, so they had to get out of the stocks. Therefore, like I said, the worst may be over in the midcaps also.

Will they rise as much as the frontline stocks? it will take a lot of time for people’s confidence levels to get over, but one could safely say that even yes, in the midcap sector, the worst maybe over.

Q: You have been an i-banker before, what’s your observation on what’s been going on there, not getting subscribed the last few issues yet, price bands being drifted down, extensions being sort, what would you make of all of it as an investor?

A: I think the short answer to that is very aggressive valuations. You’ve planned an IPO way in advance, you’ve thought of the price band, you’ve looked at the market segment and then you are caught on the front foot because you are already committed to a valuations. It’s very difficult, inspite of what’s happened in the market, to immediately go back on that valuations because the client does not want it and the investment bankers are committed, to delivering that value.

Realistically, what’s happened is that, there are just too many opportunities now in the market. Investors are now looking at it and saying, do I really need to subscribe to these IPOs at the current valuations. Today for the big one’s, the IPOs which are there, the valuations are not really justifying the price.

Q: Does anything from the primary market that’s being offered right now looks interesting. Three weeks back these would all be really sexy sectors, hospitality versus the medical space, real estate and infrastructure?

A: That’s what it is. Three weeks ago these were the flavour of the month, they were the sexiest sectors and the valuations commitments that were given were based on that. Today, in one weeks time, we are just in a completely different world. If you are talking about real estate, there are whole host of other real estate companies which one would rather buy at their valuations, than look at this offering.

Similarly in infrastructure, we were just discussing GMR, Punj Lloyd, where one would not take positions out there. So, will they get subscribed? Yes, because we have the best investment banker committed to delivering these IPOs. So they would get subscribed, but as an investor one could wait and have other opportunities currently.

Q: For most people, this was supposed to be the upper end of our trading band and we were going to consolidate for a while. What do you think is the greater likelihood by the time we step away form the budget? The market will be significantly at the higher levels or just circling this number?

A: Our view is that the market would be circling around at this number. We really need some much bigger or better news, like I said internationally US still continues to have a lot of issues, we’ve got the credit card delinquencies which came in yesterday, real estate sector is overvalued, there is the bond issuers issue. So news flows from the international markets doesn’t seems to be good.

Domestically, I think the corporates are not doing relatively as well but, we will have a 17-18% growth in all the corporate trades. So for the market to move somewhere significantly, as a whole, we will require a whole host of good news and a lot more confidence. But in the meanwhile, we will have these dips, there will be a lot of good stocks specific pickings. It is not a bad time to be an investors over the long-term in this market.

Q: When do you see participation coming back or volumes picking up again for the market? Do you think they might get back to the levels we had at the start of January?

A: It’s unlikely it’s going to happen in a short period of time. It will take time for people’s confidence levels to rise up. There is a loss of confidence, there is a lot of cash losses that people have suffered and we just believe that it will take a couple of months time. The markets will have to hit new highs for people to really get excited and for the volumes to go up. It does take time for people’s expectations to match in as long as people expect that yes, the markets are there to give 15-20% returns and not the 50% returns that everyone is expecting, that’s going to take sometime.

Q7: What are your expectations from the budget this time. A lot of people are talking about tax cuts this time around, do you think those are realistic or the budget end up being another non-event which we make a lot of song and dance about?

A: I hope that there is something for the corporate sector out there, but realistically, this is the last budget. We are going in for elections after this budget, there is some pressure on commodity prices, food prices. So currently, I’m not too hopeful that this will be a very pro corporate budget, its likely to stick within the political arena. The budget is again for the common man, to see what it can do for the weaker section of the society, as opposed to a pro corporate budget.