Mar 05, 2013, 08.42 AM IST | Source: CNBC-TV18

RBI may ease rates in March; cautious on midcaps: PN Vijay

Hopeful on the RBI monetary policy expected in mid-March, PN Vijay of askpnvijay.com believes the central bank now has a lot to chew on.

Hopeful of the RBI monetary policy expected in mid-March, PN Vijay of askpnvijay.com believes the central bank now has a lot to chew on post the Budget. Vijay believes investors have more confidence in Finance Minister, P Chidambaram and the roadmap given by the government via the Union Budget 2013-14 .

"The RBI has always been saying that a single hand can't get inflation down and get growth up. Both the RBI and the government need to do something about it. So, I think it sets the stage and some of these statements that have been coming from the RBI governor over the last few days, also indicate a certain softening," adds Vijay.

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On the market movement, Vijay advises investors to be watchful but rules out the need to be alarmed about it. "One should read into it, but not read too much into it because the mid-caps are a risk trade, they are not a return trade," says Vijay on the midcaps tanking in the market.

Below is the edited transcript of Vijay's interview to CNBC-TV18.

Q: What are your views on the market movement today?

There is no carnage in the broader market surely. Infact, two very significant sectors, oil and energy and banking are showing pretty good backbones. So, I would not worry about the type of news we heard from China. The Nifty loosing half a percent is no big deal.

The mid-caps are a different story because retail investors invest a lot in mid-caps and some of the supposedly okay mid-caps have been tanking. There is a great worry. One should read into it, but not read too much into it because the mid-caps are a risk trade, they are not a return trade. So, there is potential risk in every mid-cap, however good it is. For example, how can one describe what has happened in National Hydroelectric Power Corporation ( NHPC ) last few days. The government hasn't pledged its share. It is a very stable business model, but there are some operators who are in trouble. So, we need to be watchful but I don't think we need to be alarmist about it.

Q: The big trigger for our market now is the Reserve Bank policy. This is expected somewhere around the mid of March. What is the expectation this time around? How would you approach the markets up until then?

A: I am quite hopeful about the RBI policy. The government has given a roadmap to cut down the fiscal deficit to 4.8 percent. The revenue deficit too is down to acceptable levels. There is, of course an issue of whether it is doable though the do ability issue was much more in the last Budget than this Budget. In the investing community, there is more confidence in Chidambaram.

There is lot for the RBI to chew on. They have always been saying that a single hand can’t get inflation down and get growth up. Both the RBI and the government need to do something about it. So, I think it sets the stage and some of these statements that have been coming from the RBI governor over the last few days, also indicate a certain softening. So, to a certain extent one can predict that Subbarao, who is rated as the most unpredictable central bank governor, could possibly look for a rate cut in the mid March review.

Going forward, my sense is that the big event- Budget is out of the way and so, the risk level in the market is much lower. We are seeing some sort of a semblance of orderliness. There is some fracas in the midcap market and that just which I think is just beats me. It is more related to market players, operators' weak hands, promoter shares being sold by NBFCs, etc. I wouldn't gleam too much apart from that. The fact that the broad market is holding, is a good sign even amidst negative global cues. So, I would imagine that one need not worry too much about the market and one could try to build a portfolio from these levels.

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