Don't miss rally, up equity exposure to 30-35%: Nirmal Jain

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Don't miss rally, up equity exposure to 30-35%: Nirmal Jain

India is shining again. After a robust rally of almost 11% in January, Indian market is charming foreign investors. Given that bad earnings season is over and no negative news is expected in the domestic front, experts feel that the market is likely continue its uptrend.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » 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 Larsen BSE | NSE 29/05/12 Are Mutual Funds betting on Larsen? Other Stocks in this news ICICI Bank |

India is shining again. After a robust rally of almost 11% in January, Indian market is charming foreign investors. Given that bad earnings season is over and no negative news is expected in the domestic front, experts feel that the market is likely to continue its uptrend for sometime now.

Nirmal Jain of IIFL thinks that investors should make hay while the sun shines and advises to increase equity exposure to 30-35%. In an interview to CNBC-TV18, he said that easy liquidity has propelled global equities including India.

Lauding the Reserve Bank of India (RBI's) move to cut cash reserve ratio (CRR), Jain said that it has improved liquidity and sentiment.

Below is an edited transcript. Watch the accompanying video for more.

Q: It's been a terrific run in January. Do you think it's sustainable or would you take profits here?

A: At this point in time market sentiment has improved FII monies coming in. This is the first time that the FOMC gave some guidance on interest rates and they said they are not going to increase them for three years. Liquidity is benign all over the world and though that liquidity can flow into emerging markets, like in markets like India which is what is happening. A lot of monies are coming into the primary market because they find Indian stocks cheaper in the long-term.

So, even if growth tapers off to 6.5-7% that is still good. A good amount of money has come in. From now on market will consolidate. I don't think that this runaway rally can continue for too long because the key attractions that valuations are attractive will now become little less attractive as we go forward. Now investors would look forward to policy actions what comes in budget, what happens on the macro front here as well as any news from Europe.

Q: In what kind of range do you think the market will consolidate?

A: As of now around 17,000. In fact USD 2 billion has come in this month and it looks like more money can flow in. This kind of scenario can continue for some more time. We can see a range of 16,000-18,000 in the current market environment. Another positive thing that has happened for the Indian market was the CRR rate cut which has boosted the hope that the interest rate maybe cut in the March policy meeting or if not March then April for sure.

That was one key problem with the Indian economy that the investment cycle had collapsed because of high interest rates and tight money market conditions. India is in a unique scenario where monetary conditions are very tight because the rest of the world is having very easy liquidity at this point in time. So this will trigger growth with a lag but from a stock market investors' point of view they will look forward to that kind of positive development and more money can come into the market.

Q: What is it that you guys here about the money? Is it basically ETF laid money that's chasing momentum in the market? Are you hearing of long only funds getting into stocks and sectors now for a longer-term call?

A: I think it's both because this morning itself if you see two large blocks of HDFC Ltd and Kotak Bank have been trading on the exchange. These I think should be on long only funds. It's not that they are only hedge funds but even long only money when the market went down to 14,000-15,000 levels. They found valuations compelling and with liquidity becoming easy, particularly, in the US and the world over it's both. So it's not only hedge funds but I would guess long only funds as well.

Q: Do you think we have a floor? Can you say that with confidence that 4,500 Nifty or 15,000 Sensex is a floor for 2012?

A: Nobody can be 100% confident, but with this scenario, at least 90% confidence can be there on these levels.

Q: What is the general domestic situation now? Do you think people have participated? Is there a change in sentiment that you can sense from the retail HNI fraternity or do you think most people have missed out on the January rally?

A: Most of the people have missed out on the January rally but the mood is changing. Now people are getting more confidence in the market and they are looking forward to a similar kind of rally continuing in the midcap and smallcap. We haven't seen much retail volumes changing in January if you look at numbers in the retail volumes particularly the cash market which has not moved up much but as you talk to people, it appears that if this rally sustains for sometime then retail investors will start coming back to the market.

Q: Where is it that you have seen a pickup in interest because for the last 15 sessions domestic institutional investors are being sellers. Is it institutional guys, mutual funds or HNIs who are getting back into the market?

A: HNIs and retail investors have started enquiring and talking. For retail and HNI investors, if the rally continues for a couple of months more then they will start coming back to the market. As you talk to people at various branches and they talk to customers, we get a feel that many of them are looking at the market more positively now than what they have done in the last two years.