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Oct 10, 2012, 05.41 PM IST
Ashith Kampani, chairman, CosmicMandala, says that after the quick run up the correction is always welcome. Our political environment is very challenging and is keeping the sentiment bit low.
Below is the edited transcript of his interview to CNBC-TV18.
Q: What is your view on today's correction? We have lost close to about 1 percent odd. We are underperforming a couple of the European markets as well. Is this a routine profit taking post the run up that we have seen or do you think that the market has topped out now for sometime?
A: A correction is always welcome after the quick run up. In the last 4-5 weeks, we had slew of announcements like fuel price hike, FDI in retail, various other action taken by the government, the GAAR implementation schedule may come out and few other things which are positive in nature which took the market up to 5800 levels. Our political environment is very challenging and is keeping the sentiment bit low.
The rupee also had a good run up and it came down to as low as 52 now back to 53 levels. The crude also helped us when it went down to USD 108 on Brent. But due to tension in the Middle Eastern it is back to USD 114. IMF has also reduced growth of global and various developed markets including India. When the growth is going down, the crude should fall down but it has gone up instead.
I believe that it is a temporary blip and the moment crude starts settling down again it will help us to reduce our import bill and bringing fiscal deficit into a right direction. QE3 and Europe announcement of buyback of the debt were the global flows which helped us and also China is looking to put some kind of a thought process on the stimulus which will help again the global commodity prices and stabilize the environment.
We need to see how the RBI will look upon on 30th October. Are they willing to reduce CRR or interest rate which would be very positive and next session of the Parliament where the FDI in insurance and few others will be tested? So we need to manage the time till December and if it is successfully managed and the government takes more positive steps then it is a great time to buy during this correction.
Q: Would you buy any real estate names because this space has seen a very good run up but today it has come in for profit taking? Would you use this to accumulate?
A: We need to look how the sales are happening in the rest of the country. Some stocks may be sensitive to the current events. One can look at Godrej Properties or few others in the different region which are in Tier II and Tier III cities who continue to chug along.
Q: Investors who have been sort of trapped in this market have also used the September rally to exit with profits. We have seen it in the mutual fund redemptions as well that stand at about a two year high. What in your mind is the activity that domestic institutions will see from here? Do you continue to expect profit taking at these levels from the domestic side of the business?
A: The mutual funds always have the challenge to manage the outflow versus inflow. If there are more redemptions they have limited choice but to sell, but if there is a change in the insurance holding pattern and if they are allowed to increase up to 20 percent of holding in a particular stock, that flow will come into the market and that will definitely help disinvestment as well as wherever there are large cap, they are holding around 10 percent which can be increased to 11-12-13 percent which will be a slightly bigger boost to the market. Also the trading activity will stabilize and if FII continue to pump in money looking at whatever reform process which is getting on into this country with the implementation that would added fuel to the fire.
Q: What are the most important things that you would watch from Infosys this quarter and given the kind of currency movement that we have seen, the weakness in demand etc, do you expect any guidance cut from the management this time around?
A: No, I don't expect any guidance cut but I do expect that they have made some consolidation capabilities and some acquisitions which they have done. There needs to be some clarity on how they will bring on the table the incremental earnings. If the rupee remains between 51-53 then that would give some more clarity on the guidance the way forward.
Q: Do you think the markets need to price in any kind of a political risk?
A: Everybody is trying to price in a political risk after yesterdays some of the announcement of some of the UPA allies. Everybody has started concentrating back on the domestic news and has started relying less on the international news which is a good sign. And if the current UPA and the government is able to chug along the reforms and take the allies and the supporters with them till the December winter session, then the whole thing will come back with a bang.
Action in Godrej Properties
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