Investors to get good opportunities in Mar-Jun: Madhu Kela

Indian market has given bad time to investors losing almost 25% in 2011. Most foreign investors have fled away from Indian soils and there is a growing nervousness after the S&P downgraded nine Euro nations. However, some experts feel that Indian market has domestic positives that may trigger market.

In an interview to CNBC-TV18, Madhusudan Kela, Chief Investment Strategist, Reliance Capital says that thiese lower levels can be used as an entry point. "The market may go to 5,200 and then may come to 4,500 or 4,400 and that will also look a big fall. This bear market would have spend enough time by March-April-May-June so there is that entry point which is what I am looking at," he elaborates.

He is pining hopes on the budget as Kela feels that the government will take some bold decisions. "It is only post budget that the real acid test will happen. So market may really present a great opportunity from a investor point of view between that quarter of March to June," Kela reiterates.

Here is an edited excerpt of his comments. Also watch the accompanying video.

Q: What's your sense, there has been a bit of hope in the last few weeks, but do think a bottom is formed at 4500 or will there be another big dip?

A: Before we come to the market if you allow me let's talk about the country. What I am perturb about is essentially we seem to be in a self destructive kind of a mood, wherein each one is spreading the panic to the other person and we are now getting compared with countries like Greece and all, to my mind it has absolutely no relevance.

It's been ages that I heard that demographic of India is great and there is latent demand of infrastructure or there is high saving rate, all those things seems to have got forgotten. I am not saying that there are no challenges, there are, but to compare India with Greece or Italy like a situation, it's premature, so in a longer term India story in my opinion is still is very much intact.

However, we are in a way in a inflection point that if we do not do as a society and the other thing is it's so easy to blame government for everything as if the corporate took a loan and the government instigated him to take a loan or to a foreign exchange exposure. It is very easy to blame the government, but collectively unless everyone recognises that if we do not attack this opportunity, which is glaring in front of us over the next 6-12 months and if we remain in this self destructive mood then it could be a very challenging situation.
 
I hope as we have responded to all the crisis in the past, whether it was a 1991 crisis or whether it was a 2002 crisis, as country we will respond to this crisis also and there are many levers and many opportunities given the global step up, the question is the mindset.

Q: How do equity investors realign themselves or align themselves to the feeling that in six years the market has not gone anywhere? It's a very unusual situation for equities as an asset class, Sensex has not gone anywhere? So how do investors approach that?

A: Market has its own mechanism to discount everything and which is why people say that the market is the biggest leveler and biggest intelligent machine, which has ever been created. In a lot of situations, in my opinion, market may have discounted that bad news. It doesn't mean that after you discount the bad news you will start running immediately, so when I see stock prices, a lot of smaller cap or midcap companies, they are very compelling opportunity, so market may spend time over the next 3-6 months, but I think it will present a great opportunity.

Let me say if I had to pin down where 2012, most people are hoping that the market may make a bottom before March and after March everything will be hunky-dory. In fact, I have the other way around. I think market may spent time, earn these levels till budget, but it is only post the budget that the real acid test will happen. So market may really present a great opportunity from a investor point of view between that quarter of March to June.

Q: Why do you say that a real bottom will be formed post the budget? Is it local risk you think post the budget the local macro will determine that or you think globally things will worsen between March and June?

A: Maybe a combination of both. Whatever budget document, which gets presented this time will get hugely scrutinized given over analysis of all the macros, which have happened. You will not be able to get away that you assume there will be a 20% tax increase over next year.I don't think investor and people will buy that, so that document will be very important and one fear, which I have, which I want to see it play out is on the currency side.

I think that is a vicious cycle of currency, you have 51 to a dollar or 56 to a dollar or 45 to a dollar, all your problems lie there if you go to 56 all corporate balance sheet will look very ugly, leveraging will look very ugly. Let's not forget we have USD 200 billion of corporate debt or more than USD 200 billion of corporate balance sheet of India, so I want to see that pan out over the next 3-6 months. 

I do not think that money gets attracted just because you offer 1 or 2% higher interest rate, money gets attracted if you offer confidence. I would hope that post the UP election if there is some semblance in Delhi as well and we will get along with the reform agenda.

Which is why I say that let this market pass next two quarters and it may present a good opportunity if people are skeptical about the budget. By then some of the global news flow, which has been off late very positive may play out itself.