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Moneycontrol » News Center » Markets » Expert & FII Outlook
Positive on infrastructure, financials: Kotak Mah Cap
Published on Wed, Oct 03, 2007 at 13:04   |  Updated at Wed, Oct 03, 2007 at 21:23  |  Source : Moneycontrol.com
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Shanti Ekambaram, Director of Kotak Mahindra Capital has a view that the markets will continue to rise on liquidity flows. She adds that there has been a renewed attraction for India from all kinds of investors and a huge amount of liquidity is waiting on the sidelines to come in. 

 


Shanti Ekambaram is positive on infrastructure and financials.

Excerpts from the exclusive interview with Shanti Ekambaram:

 

Q: You have always been an advocate of liquidity and we have seen an abundance of it over the last 10 days and for the better part of September. Do you actually see something like this sustainable at these magical levels?

A: It is very difficult to predict a level, but the fact remains that we are seeing a great amount of liquidity and just a virtual rush, which is the reason why people are just buying everything in sight and you are seeing stocks and the index reach dizzying levels. So, I think as long as liquidity continues to be strong, you are likely to see a strong market.

 

Q: You have seen several rallies in the past ten years; we saw a rally in 1999 and subsequent rallies in past several years. Do you think that there is a sense of irrational exuberance over here or do you think we have gotten this feeling in the past and the bulls have belied us? 

 

A: The situation in past years has been quite different but if you look at the situation right now, people are really buying India story. India is looking very attractive from a growth perspective and when we look at the valuations of some of the sectors, you will wonder why people are buying up so much of these. Perhaps what people are doing today is looking at the next five-ten years in perspective and if you look at the kind of confidence, there is a story for the next five-ten years. So you have got all kinds of players whether they are short-term, flippers, or those who are looking at a long-term perspective. I think right now, all of them are sort of looking at India with attraction and that is different from what may have happened in the past.   

 

Q: What would you advice your HNI clients who have remained invested? Would you ask them to take off some money or do you think this not the time for it?

 

A: It is very difficult to advice. The other day, I was joking with somebody saying that those who are invested in the markets are afraid to step off because they believe that some more steam is left. Those who have been out of the market are afraid to get in at these levels and are just hoping and praying that the market would come down. So, apart from that, you are seeing a huge amount of liquidity waiting on the sidelines. So, I would not look at the index. I would go more sector and stock specific.

 

If you look at it from a 3-5 year perspective, then look at the sectors that India would really do well. I had earlier talked about infrastructure, consumer, financial services and some of those plays and really try to see who would you bet amongst those. So, it cannot be a broad market perspective, otherwise at these levels, it is very difficult to advice somebody to say get in. So, I think you have to distinguish between the short-term players and the longer end players and I think you have to get more sector and stock specific.

 

Q: Are you trying to say that valuations are not justified at these levels?

 

A: No, what I am saying is that this current situation is driven by liquidity. When markets are driven by liquidity, many a times fundamentals are forgotten. So when the market is powered by liquidity as it is currently, it is very difficult to say whether this is fundamentally valued or not, its investor’s perspective.      

  

Q: As an investment banker, do you think heavyweights should come in and soak up the market with more paper? Is this the time to tap the market and collect whatever money one wants for capex?

 

A: One thing I can say for Indian companies is that most of them today plan their growth and their infusion of capital pretty well. Remember public markets are not the only sources of capital available since you have a lot of private capital available today too.

 

Obviously, when the secondary market is doing so well, primary markets will not be far behind and we have just seen Power Grid Corporation getting stupendous response. So, I am saying that companies are timing and planning their capital raising pretty well. Obviously, we would love to see as many companies come into the market but I think that they are sort of far ahead of the curve than anybody else are.

 

Q: It’s an important month that we are stepping into, what are you expecting overall in terms of earnings for this particular month and of course anything specific that you may be willing to bet on what the Reserve Bank may do ahead?

 

A: As far as the results are concerned, you will probably see a steady trend with some sectors out-performing the other. After the closure of the very large amount of ECB window, we have not yet seen whether interest rates make any difference to the company’s bottom-line or not. I think this quarter again you will see fairly stable to very robust growth in some sectors whereas the other sectors may see sort of tempering on the margins as far as growth is concerned. So I think it will still be buoyant and positive but more widespread.     

 

Q: You have been a long watcher of the money markets as well and of the RBI, what are you expecting given this gush of very rapid asset price inflation? Do you think that a central banker would be far away from rate cuts than we were a week or two weeks ago when the Fed cut rates?

 

A: Whenever there has been such a large rush of liquidity in the markets wuth the kind of efforts the central bank is putting in, it probably calls for a CRR hike rather than any cut in interest rates. This is purely to soak up liquidity and I think the central bank has been using the NSS as a great instrument. So, just from a liquidity perspective, who knows, you may actually see a CRR hike.

 

As far as interest rates are concerned, I continue to maintain that it is likely to be stable. There is a little bit of softening bias but I think perhaps we are not yet there for a rate cut.

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Tags: Shanti Ekambaram, Kotak Mahindra Capital , liquidity
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