See huge FII inflows, paper supply in Q3FY10: Enam Sec

In an interview with CNBC-TV18, Manish Chokhani, Director at Enam Securities and Dharmesh Mehta, Head-Broking of Enam Securities, spoke about their reading of the market and the road ahead.

Below is a verbatim transcript. Also watch the video.

Q: What do you expect the mood to be now - confused, cautious or bullish?

Manish Chokhani: Conferences are never periods where people come and form opinions on that day itself. The first thing of course, for everyone coming in here, it is a year after a very major event. So everyone is very pleased first of all to be back here to say that we are solidly behind India and solidly behind the Taj Group. So I think that is the first thing that everyone has confidence in India and not just the 100 companies but the 150 funds, which are here as well are actually ample testimony to that, that this remains a large and attractive destination.

Q: Can you give us a little bit more clarity on the kind of funds who are attending - the 150 that Chokhani spoke about? How many are the absolute return guys? Any big new long only players etc coming in?

Dharmesh Mehta: We have got a lot of new long only players also and every year we have a mix of the funds. So it is very well diversified and definitely more interest with the long only guys this time around.

Q: Any sense from the preliminary discussions you would have had with the fund managers who are attending on how they are looking at this part of the world right now? Are they cautious about valuations or is the mood or the tone generally bullish?

Mehta: They are very cautious on the valuations but on the other side, they are very excited to come into India and still invest because they see growth. Valuation is a concern but end of the day there is a growth and the kind of opportunities, which are there in India, they cannot see anywhere else. So they are little bit confused on what to buy and at what price to buy but definitely they would like to buy.

Q: Is that the sense you have as well that they like a lot of themes in India but they are dithering about whether this is the right entry point or the right price point to be buying into India?

Chokhani: Yes, I think that is fair and this goes back to why Mehta named this conference as 2020 conference - it is a theme we have held for a number of years. In a way 2020 signifies the year 2020 as well and at the same time you have Twenty20 Cricket where you can hit some fast balls as well and that surely what India is about.

So while no one can dispute that the longer-term outlook for this country is great, in the short run sometimes you need to hit a few fast balls for boundaries as well. The beauty of our market is that you have both of these options available. In the current context, of course the market is pausing for breadth. We have had a quick hard run. It has been a unidirectional bet for people betting against the dollar towards emerging markets and commodities and it looks like temporarily you may get a short burst of dollar strength and therefore some weakness in emerging markets. So we are in that sort of a patch.

But having said that, you are very close to the beginning of the New Year and people don't want to take too many bets right at the end of the year to upset their net asset values (NAVs). So it is all heading up to a very climatic first quarter of next year - January, February, March - where not only will you see very large inflows from foreigners and also from local insurance but also very large issuance calendar both from the government as well as the private sector.

Q: Your best bet is that you actually see that correction that you are alluding to before the New Year and then you see the rally resume in the January-March quarter?

Chokhani: I wish I knew answers to things like that. Don't ask me tough questions so early in the morning. It is hard to call when the market will correct. It surely needs a correction - everyone is hoping for it and waiting for it. Whether the correction has already occurred - because we already had a 1,000-1,500 point dip and we have come back from that last week - only time will tell.

Q: What is the sense you get when you talk to people, are people still waiting for that dollar strength related correction or do some of them believe that what happened a fortnight back was it, we should not wait for a bigger dip to buy?

Mehta: As Manish Chokhani said - it is coming to a year end, so everybody is cautious because we had a very terrible year last year and whatever they have gained this year, everybody is in a mood to save and they don't want to give-in in the last two months.

So very cautious in that sense on what they want to buy. So clearly waiting for a correction, wherein, valuations give them more comfort rather than only the momentum.