Jul 12, 2012, 08.23 AM | Source: CNBC-TV18

Odds in favour of bulls more than bears now: Motilal Oswal

Motilal Oswal, Chairman and Managing Director and Raamdeo Agrawal, Joint MD of the company share their story in an interview with CNBC-TV18.

Around 25 years ago, two young men founded a small brokerage firm in Mumbai with very little money and a big heap of dreams. Today that brokerage firm has become one of India's largest homegrown, fully diversified financial services company. The company is Motilal Oswal Financial services.

Motilal Oswal, Chairman and Managing Director and Raamdeo Agrawal, Joint MD of the company share their story in an interview with CNBC-TV18.

Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying videos.

Q: 25 years has been quite a journey. For 25 years you have seen various business cycles. You must have seen lot of hope, lot of despair, where would you put where we are today on a scale of either hope or despair?

Agrawal: One of the things I have seen in the stock market and particularly for the economy underlying is that every seven years, you have one cycle. This seven year cycle at least for Indian markets, is again going to happen. The next appointed date for the boom is 2014-15.

Q: Do you think we are overdoing the pessimism?

Agrawal: Yes, for sure. But it's a cycle. When there is pessimism, people talk about pessimism. When there is a bull run, for example if you look two years back, you see the headlines and we were talking about double digit growth then.

Q: But, here we are talking about double deficit, policy paralysis.

Agrawal: It's all there. I am not saying that there is no policy paralysis or there are no problems. There are problems. But it's a process. Once the problem comes, you start highlighting them. The guys who are responsible start taking steps, they are also cornered. They cannot say that we don't want to do anything.

Q: Are you as optimistic?

Oswal: I am a born optimistic.

Q: The last fall hasn't ground that optimism down?

Oswal: As Raamdeo said, we have seen those kind of cycles and we have to accept the fact that financial services and even in Indian economic cycles, it will happen over a period of time and we are geared for good and bad times.

Q: Raamdeo you are an eternal optimist. You don't see the twin deficits, the policy paralysis. Does the India story still hold good for you?

Agrawal: India is doing much bigger than these twin deficits and all. We have problems of one quarter, two quarters, four quarters and very manageable problems. The people who are raising the objection about the problems themselves are saying that it is something that cannot be sorted out.

Q: Is it something that can be sorted out?

Agrawal: Yes it can be sorted out. So long as you have USD 300 billion sitting in your kitty, you can think a lot. Everything is possible. But if you are out, like in 1992 you had only seven days import cover, nobody will give you import cover, nobody will give you forex. That's not the situation this time.

Q: We have had a 5.3% number recently. A monsoon that’s looking like it may not be the best amongst what we have had in many years. So, we are looking at perhaps sub 6% growth for the full year?

Agrawal: It could be 2%, it could be 3% for a year. How does it matter? It doesn't come to an end.

Q: What's the worry that we could go back to the 90s where you had inflation growing faster than growth and that puts a completely different spin on the mood, on savings, on everything?

Agrawal: We are unnecessarily trying to visualize lot of draconian days. Nothing is a zero probability event. I don't think things are completely broken down. You look at May, cement dispatches are up by 13%. You can’t dump cement somewhere, it’s a perishable commodity. Obviously, some construction is happening somewhere and 13% is a large number.

India is the second largest cement consumption country in the world. So when you see an upside of 13%, 13% more construction is happening and it is a very healthy sign. You look at your car sales, it is up by 3% on YoY basis despite the fuel problem, diesel engine problem and petrol engine problem.

If you could get enough diesel engines probably, your sales would have been growing at 8-10%. Motorcycle is up 12%, corporate profits are up 28% QoQ, still we have a declared IIP of 1%. Government revenue is up by 17%. So, which one is to be believed? We need to do certain things and which authorities will do.

They are taking proactive actions, some of them are political, some of them are clear sloppy implementation or whatever, but it’s not broken down to a level where we must lose hope.

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