See mkts pull back towards Dec end: Religare Sec

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Sangeeta Purushottam, Head - Institutional Business, Religare Securities, feels there will be a period of weakness during the first half of December. "There is a sense that there is still some level of selling that is left to go - so there could be more selling by hedge funds and that's likely to impact the market," Purushottam said.

 

"The silver lining is that there are funds who are sitting on cash. These people are waiting eventually for the selling to be out of the way. So our sense is: we account for some kind of a pullback for a few weeks and that's likely to be more either towards the end of December or early January," she added.

 

Here is a verbatim transcript of Sangeeta Purushottam's exclusive interview on CNBC-TV18. Also watch the accompanying video.

 

Q: What's your sense of how December might shape up: range-bound to a bit and then a dash towards gaining some ground, or are you expecting to see something else pan out?

 

A: We are going to see a period of weakness particularly in the first half. There is a sense that there is still some level of selling that is left to go - so there could be more selling by hedge funds and that's likely to impact the market.

 

The silver lining is that there are funds who are sitting on cash, you do hear people whose outlook over the longer term is turning a little positive, and these people are waiting eventually for the selling to be out of the way. So our sense is: we account for some kind of a pullback for a few weeks and that's likely to be more either towards the end of December or early January.

 

Q: The big underperformers today were the rate-sensitives, autos - that reacted badly to their sales numbers - and banks, which came off very sharply as well. What do you expect to see in those pockets?

 

A: There is little respite that we are seeing for these sectors in terms of demand. News flow for autos and property would continue to be negative. The more you talk about the property sector, the greater the expectation is that there is going to be further 15-20% correction in prices.

 

With the auto sector, there is some kind of comfort in valuations, but in property there is still a question mark for some of the larger stocks. The other thing that has also happened is: we haven't yet seen any kind of decisive movement downwards in the interest rates though there are wide expectations that it will happen - most people agree with the direction. We are still to see the impact and credit flow easing not just for the consumption-led sectors but even to the industry as a whole - that's really a concern. Then there are emerging concerns on what's going to happen to the asset quality as we go into next year. So this whole thing still needs a few weeks to play out. Some relief can come only if we see a decisive cut happening in interest rates and the flow of credit easing.

 

Q: On autos specifically, the market was quite surprised by the weakness in Maruti's monthly numbers. The stock fell 9% despite it being hit quite badly over the last many weeks. Do you think all the bad news is in the price or are there still negative surprises that are cropping up there?

 

A: I think December would end up being another weak month because traditionally December is weak in any case - people would be postponing purchases into the new year. I don't really see a respite in the next month's numbers, January-February onwards, we could see some respite coming through and it will also depend a little bit on what happens to interest rates.

 

One possible reason could be that there may be some expectations building up - we could see excise cuts happening - to give stimulus to the sector and that's something which is being talked about in the print media. Maybe that's one reason why they have held back some of the purchases apart from the overall economic weakness.

 

Q: How high should expectations be from a market perspective from policy over the next few weeks given the kind of changes we are seeing?

 

A: I don't think that expectations will be very high as the government has very less time left at its disposal now. If we could expect some election-related announcements by the end of the month or maybe earlier January, after that the whole machinery will get into election mode. The emphasis will be more in terms of damage control and patch work, so I really wouldn't have very high expectations at this point of time.

 

Q: What about monetary policy action? The money market for a fortnight now been pricing in some kind of RBI move on rates, on liquidity but that hasn't fructified either?

 

A: That's right. That could possibly be because although inflation has been falling, the fall hasn't been sharp enough to come into the comfort zone to be able to make these announcements. That is something that could actually happen over the course of the next two-three weeks or maybe that will give some sucker to the market. That is one action that may come through somewhere in the course of this month. The other action could also be - which is widely expected and has obviously been hinted at too - is a cut in fuel prices. Once the assembly elections are over, [there could] possibly be some kind of a stimulus package for the manufacturing sector. There will be a few of these kinds of announcements again - in a way geared more at the vote bank. So I am not sure that we are really going to be looking at anything very structural coming out right now.