SENSEX NIFTY
Jan 08, 2013, 10.35 PM IST | Source: CNBC-TV18

Nifty ends above 6K: ICICI Prudential sees 3 triggers ahead

In an interview to CNBC-TV18, S Naren, ICICI Prudential says fuel price hike, RBI’s policy on January 29 and Budget would be the next triggers for the market. "There have been statements that we could see a price hike in diesel of a rupee a month. If that were to happen in the next 10-15 days, it would be the first trigger," he elaborates.

It was another quiet day for the Indian market. The Nifty crawled back to the 6,000-mark, up 13.30 points. The Sensex gained 51 points and closed 19,742.52.

In an interview to CNBC-TV18, S Naren, ICICI Prudential says fuel price hike, RBI's policy on January 29 and Budget would be the next triggers for the market. "There have been statements that we could see a price hike in diesel of a rupee a month. If that were to happen in the next 10-15 days, it would be the first trigger," he elaborates. 

Naren further says the market is eagerly waiting for a January 29 trigger. "People are almost sure that there will be a rate cut and the probabilities have risen substantially over the last few months," he adds.

After RBI's policy, Naren says, the next trigger would be Budget. "For 2013, we believe that the more they are able to cut fiscal deficits, either through increased taxation or reduced subsidies or reduced expenditure, to that extent, the market has upsides," he asserts.

Also read: Nifty has decent chance to retest all time high, say expert

Below is the edited transcript of S Naren's interview on CNBC-TV18.

Q: What is your sense with regards to the market? Where do you think the next trigger is coming from? Which direction is the likelihood of the Nifty going in?

A: There have been statements that we could see a price hike in diesel of a rupee a month. If that were to happen in the next 10-15 days, it would be the first trigger.

The market is eagerly waiting for a January 29 trigger. People are almost sure that there will be a rate cut and the probabilities have risen substantially over the last few months.

After that, you have the Budget. For 2013, we believe that the more they are able to cut fiscal deficits, either through increased taxation or reduced subsidies or reduced expenditure, to that extent, the market has upsides.

I think the old worries, which we used to have on crude oil, are all becoming much smaller at this point of time because US production has been going up. The world seems to have handled already a situation where Iranian production is pretty small at this point of time, maybe Iraq is compensating for Iran. So, I think some of the older worries like crude are behind us.

We now only have to worry about how we are able to tackle the issue of current account and fiscal deficit at this point of time.

Q: What are you expecting to see in terms of policy reform from the government? So far what has come in has been constructive, but the market seems to be greedy for more. What are you watching for? How soon do you think it could come through?

A: I do not think we are in a position to predict when it will come through. Starting January-February, last year, we believed that diesel price hike has to happen and it will pull the market up, finally it came in September. So, it was a pleasant surprise to see this whole idea of a slow regular increase in diesel and kerosene price. That would be an extremely positive development. At the end of the day, issue of increasing subsidies is the real issue which is dogging the Indian economy. So, any steps taken in that direction will be received very positively by the market.

Q: What is your sense with regards to foreign investors and their outlook towards India in 2013? We have been beneficiaries in 2012 with regards to a strong Foreign Institutional Investor (FII) inflow, but do you think that it could repeat in the same momentum in 2013?

A: We believe that we can predict the quantum of foreign inflows and the size of the foreign inflows. Actually, it is very difficult for people to actually predict the quantum of foreign inflows. If you were to see yields in US going up or if unemployment rate in US actually comes down sharply, it would be actually negative for flows to emerging markets. I think that part of it is very clear.

I think the buck is that we have to worry more about a substantial improvement in the economies of the West because I think we have already got a fair amount of flows based on the fact that India growth is much higher than the world growth. Now, we have to worry more if growth improves in the West rather than if it deteriorates. I think if it goes back to deterioration, the trends, which have played over the last three years of money coming in because of India growing much faster, should continue.

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