First Global bullish on auto, IT, oil marketing cos, pharma

Q: How do you read the fact that Reliance is monetising some of its treasury stock. What would be the right way to read it?

A: I haven't looked at this thing in detail but it doesn't change fundamentals of the company except that you are saying that the company is probably looking at it as this is a okay enough price to raise money and whole lot of others in the market are raising money-it is looking at that option. So one way of looking at it is, if it doesn't need the money immediately is that the management thinks that this is more than fair value for the stock.

Q: Fundamentally what is your call on Reliance-at Rs 2,100 is it near fair value for you or is it looking overstretched considering where the cycle is?

A: We think it's a bit overstretched given where the cycle is. We are not positive that oil and gas are going to run-up forever because the move that you saw was not really a fundamentals-driven move. Even though we expected the move because once you see a sharp drop in oil from 140 plus to 30 plus there is bound to be a sharp rebound. But if you look at the oil demand fundamentals, I do no think any of us would have seen than any worst what they have been just now. You would never have seen this kind of drop in oil demand so oil and many of the other commodities the move was really technical in nature. That weakness is also showing up, if you look at how the dollar is moving, eh dollar has weakened against most other currencies and yes, you have not seen the commodities fallen which is the normal behaviour because since the prices are quoted in dollars so that shows that the commodity rally is over for now.

Q: What do you think is likely from here-because you are getting to a physiologically important mark like 5,000 Nifty we have seen participation but not quite widespread participation like we saw in September 2007-do you think it is possible that this liquidity might fuel a complete blow out phase in the market and valuations concerns may not be able to reign in just in the short term?

A: I am not a big believer in this liquidity theory. I mentioned it many times that every time we look for some thing to explain it that the FII money is sitting on the sidelines it will come in but yet if you look on a day to day or month to month basis whenever money comes in it does not mean that the markets go up in those months or even those years-so that linkage does not come. The same sort of logic holds for whatever domestic money one keeps talking about. The other thing to remember is that anytime someone buys someone sells, so where is this liquidity into the market? But as I said on the view on the market right now it is where the indices would go in particular-it is a little hazy at the moment. What I am comfortable with would be a few sectors but it is how much harder to make a call on the market right now. 

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