Feb 11, 2013, 02.30 PM | Source: CNBC-TV18

Retail investors still bearish on mkt: Religare's Trivedi

Retail investors continue to be bearish on the stock market, and instead are putting their money in fixed income, real estate and commodities, says Gautam Trivedi, Managing Director and Head of Equities, Religare Capital Markets Limited.

Retail investors continue to be bearish on the stock market, and instead are putting their money in fixed income, real estate and commodities, says Gautam Trivedi, Managing Director and Head of Equities, Religare Capital Markets Limited.

He says it will take another 10 percent rise in the market to get retail investors interested in equities.

The market is likely to remain flat in the run-up to Budget as some of the key reform measures have already been announced, he says, adding that investors are now watching for signs of fiscal consolidation.

Trivedi is bullish on cement shares as he expects these companies to report strong fourth quarter earnings on recent price hikes. UltraTech Cement is his top pick in the sector.

Also read: Will global cues push Nifty in green terrain today?

Midcap stocks have taken a beating over the last couple of weeks, leading many market participants to think that they could likely underperform the large caps by a wide margin. That is because most investors would prefer to back the big names when the outlook turns cautious. Trivedi, however does not see midcaps falling too much from these levels as he says there are enough FIIs which are focused on second line shares. They will resume purchases in these stocks if there is a sharp correction, he says. In general, FIIs are still bullish on the India story, he says.

Trivedi is bearish on the metal sector. He rates Tata Motors , Bajaj Auto and M&M as his top picks in the auto space.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Getting USD 7 billion has not moved the market. What do you think is the problem?

A: The retail investors continue to remain a problem. Either the retail investors know something that we don’t or the Foreign Institutional Investors (FIIs) know something that the retail investors don’t know. The fact is retail investors continue to remain bearish on the market. They are pulling out money from all sides.

We have seen money being pulled out by retail investors from mutual funds. Now the life insurance companies are continuing to see redemptions. We see selling pressure on the retail broking side, where we run one of the biggest franchises in the country. So that is unfortunately the real reason of all this.

Q: What do you hear when you interact with retail investors? Why this pessimism?

A: We don't get to interact much with retail investors. However, when I speak to my retail team, apparently the retail investors continue to prefer fixed income instruments. The rate cut clearly was a positive, but wasn’t big enough. The yields are as yet unattractive enough for people to look at the equity markets.

Secondly, a lot of action is shifted to the commodities exchanges. Don’t forget the commodity exchanges do not have any similar to Security Transaction Tax (STT) so that is to some extent more lucrative. The volumes on the commodity exchanges have more than double of the equity markets. So, there is a lot of action that has shifted effectively there.

Real estate continues to remain a very lucrative area of investments. Gold to some extent has slowed down, given the high prices and the increase in import duty. However, alternative investments continue to remain more attractive for retail investors versus the equity market.

Q: What do you hear from the FII crowd is this interest, stock specific in terms of offer for sale (OFS) that are hitting the market or do you expect these kind of close to continue through February and March?

A: I expect the flows to continue, the momentum is very strong. Back in December, in Asia meeting FIIs had clearly mentioned that their interest in India is extremely strong. Coming January at least the long only would allocate more money into India and so far that is happening. Thus, that momentum will continue, not withstanding of course as the returns haven't been great year to date.
However, at some point retail investors will have to start participating in the market. They will realize that the intensity of the flows are strong, it wouldn't make sense to continue as net sellers. The market needs to reach at least another 10 percent higher for retail investors to come back in the market. So, in general FIIs remain pretty supportive of the Indian equity story.

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