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Jul 12, 2012, 08.23 AM IST
Once again Indian market is holding up firm amidst nervousness that the rally is short lived. Analysts feel that now much depend on the first quarter earnings and reformative measures by Manmohan Singh as he took over the finance ministry.
Once again Indian market is holding up firm amidst nervousness that the rally is short lived. Analysts feel that much depend on the first quarter earnings and reformative measures by Manmohan Singh as he took over the finance ministry recently.
Punita Kumar Sinha, Managing Partner, Pacific Paradigm Advisors is somewhat positive as she feels that 5,600 on the Nifty can be ruled out now. "It seems like the worst maybe behind us in terms of avoiding break up of the euro for the short-term. Things are generally going to be more stable from hereon. But earnings are going to be the next trigger, particularly in India," she said in an interview to CNBC-TV18.
At the same time, there is a growing concern that absolute earnings growth of Indian companies is likely to be lower but have been priced in to some extent, she adds.
Stressing that the Indian market is still trading below historical multiples, Sinha stresses that about a month ago when all the markets had corrected, valuations in India looked quite attractive.
"There is a risk that India could end up with a hard landing if certain amount of growth stimulus does not come in. At this point, I think where the valuations are in India, there is probably just a little bit more upside based on the positive global newsflow but the India specific positive newsflow has yet to come," she elaborates.
As an investment strategy, she prefers pharma stocks.
Below is the edited transcript of her interview with CNBC-TV18's Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying videos.
Q: We have had a reasonable sized rally for our market and others. What’s happening with risk appetite right now? Is it still high or has some of that tempered and global markets are getting into rangebound trading again?
A: If you remember in May, when I spoke to you, I was saying that at that time it looked like the market had corrected too much and it was presenting a buying opportunity, but obviously news flow still being a key determinant in driving equity markets. The news flow over the last month has been generally positive, but the data is still a little mixed in certain countries and better in others.
In general, I think we have avoided a collapse and a break of the Euro, atleast in the very short-term. So, I think that has obviously caused people to return back on taking risk. But then the markets have run up quite a lot. So, now again we are going to be having to look at what the news flow is going to be from hereon.
Q: Since the last time you spoke to us, has your view on India changed at all? Would you incrementally increase your exposure to the Indian market?
A: About a month ago, when all the markets had corrected, the valuations in India looked quite attractive and they were a lot of distressed valuations. But a lot of these stocks have rallied. Now, there is a lot of hope that the new reconstituted finance ministry is probably going to come up with certain reforms.
If they don’t then I think that would be a negative because the economic activity in India is clearly decelerating and the RBI is being targeting inflation. So, there is a risk that India could end up with a hard landing, if certain amount of growth stimulus does not come in. So, at this point, I think where the valuations are in India, there is probably just a little bit more upside based on the positive global news flow. But the India specific positive news flow has yet to come.
Q: What is your own sense of which way this is pushing? Are you getting the sense that the second half might be more special for the market, there is a chance we take out the highs we have had earlier in the year or is this going to be more or less about consolidation, perhaps punctuated by some of the short sharp rallies?
A: At the moment, it seems like the latter because the structural problems of the developed market have not got sorted out. They have just been pushed out and only short-term measures are being put in place to sort of avoid a crisis. So, I think unless this translates into fundamentally strong companies and growth for those companies coming back, we probably will see markets trending in a range.
Given that their crisis has been averted, unless there is some other thing that we haven’t seen, I think that we may not see a huge correction. But there doesn’t seem to be a whole lot of upside either, unless there is more positive news flow.
May 25 2013, 16:36
- in Technicals
May 25 2013, 16:36
- in MARKET OUTLOOK