See better performance from RIL in Q4 vs Q3: Kotak Inst Eq

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS RIL is unlikely to report USD 9/bbl GRM in Q4: SP Tulsian ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Q: How would you do it if you were on the buy side now? If the market were to move up another 4-5% in the near-term-would you be selling into that and creating a lot of cash in your portfolio?

A: There is already some sort of movement happening in the sense people are becoming little bit cautious and cutting down in the more aggressive position in the portfolio. I don't think people are sitting on a lot of cash at this point in time. So that is a risk over here that if the market moves up, things are okay but if market moves down then what you do in that case? You don't have any money coming in anyway to buy at lower levels. If it goes up based on just liquidity, well and good but I think that is the time to at least take out some profits in the short-term because as I was saying unless and until you see earnings upgrades, I am not very comfortable about the valuations look of this market.

Look at what is happening on the macroeconomic side-interest rate cycle is clearly on the way up. You can debate and dispute as to how much will be the increase but India is a country which is earning the highest negative real interest rate at this point of time and that is clearly not sustainable.

You have to have policy rate increases and from the existing ones at some point of time, how much the RBI compromises on growth versus monetary tightening, let us wait and see but our view is you will have to have about 200 basis point increase as far as policy rates are concerned through the year. That is a pretty big number that is going to have some implications on some sectors as far as growth is concerned.

I have already highlighted the point about earnings numbers. Fundamentally, there are a lot of changes happening in all the sectors which people are ignoring. People are just too complacent and I have seen that from the telecom sector. A year back, everybody was still soft in few sectors and when you have so many players coming in, how do you take a view that the good returns which this sector was enjoying will continue forever? There is no way it is going to last and unfortunately we are seeing the same kind of somewhat optimistic behaviour among the market participants at this point of time.

People are ignoring the danger signs in auto, cement-a lot of other sectors I see the same problems but somehow people are just brushing away these things in the gab a long-term growth and good macro and low penetration and all that stuff. So it is very hard to get excited about this market now. So if there is a correction, maybe at the right level, one should probably come in. If it goes up, time to sell.

Q: Any key slashes you have done in the metals universe as well because that is a pocket that has enjoyed quite a bit of price appreciation?

A: That is a sector, which I have completely given up trying to understand. If you look at the fundamentals of aluminum etc, it is not supportive of USD 1,800 per tonne aluminum price. It is wholly and solely driven by one factor and that is financial speculation. And faster the regulators act on it, it is better for the rest of the world. Look at the fundamentals of aluminum. We have about 51-52 million tonne per annum of supply. The demand if we analyse Q4 numbers will come to about 38 million tonne. We are effectively running a global industry, which is somewhere about 70% capacity utilisation. Next three years out it is the same number. You are seeing enough of capacity coming on to take care of your demand growth.

Look at aluminum and inventories globally, London Metal Exchange (LME) - absolutely crazy levels so what is the conclusion. Conclusion is driven by some financial speculations and somewhere this has got to stop. This is going to be a big block whenever it happens. Commodity prices will be lashed so much - I don't think people will recognize prices from current levels.