Mkt must brace itself for near-term turbulence: Tata MF

Excerpts from What's Hot on CNBC-TV18 Watch the full show » RELATED NEWS What's hot, what's not with mutual funds? Global recovery stronger than expected: IMF chief Expect Nifty to cross 5200, gains capped at 5310: MF Global Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Big boy Reliance posted strong third quarter numbers. The topline came in significantly higher than estimates at Rs 56,856 crore driven by strong volume growth. The big surprise came on the gross refining margin front, which came in at a robust USD 5.9 per barrel. Profits too were better than expected, rising 14.5% YoY.

Q3 earnings announcements from India Inc have largely been satisfactory with the exception of a few disappointments.

In an interview with CNBC-TV18, Ved Prakash Chaturvedi, MD, Tata Mutual Fund, gave a roundup of the earnings announcements so far, and his prognosis on the market in the run up to the budget.

Here is a verbatim transcript of the interview. Also watch the accompanying video.

Q: What have you made of the earnings announcements so far?

A: I cannot comment on individual earnings. But generally speaking from large companies particularly in IT and automobiles, and some midcap companies in the infrastructure sector, FMCG companies, by and large the feeling has been that there is strong recovery happening. Companies are more confident about the business that they are going to do. Largely, there has been a flavour of good cheer.

There have been some disappointments as well as it normally happens for example from some large companies in the construction and engineering space etc. The nature of that business is also very lumpy.

On the whole, I would say that the report card is positive. India Inc is looking at positive outlook for the economy and for incremental growth in the future. The earnings growth numbers at least justify that. By and large, a mood of good cheer which has been in the Indian equity markets seems to have been resting on sound foundations.

Q: What about global factors?

A: My feeling for some time is that we have seen a period of very good cheer, a long period of a sustained run, the dollar carry trade. I think there is some turbulence in the offing. We anticipate some tightening in China. We will have the credit policy at home on January 29.

The feeling is that there may be some action on mopping away of liquidity. Similarly in the US, if the dollar carry trade actually unwinds then what happens to the flows that happen globally. I think there is some turbulence ahead.

We should not forget that the good cheer in Indian equity markets has been based on sound foundations, on sound business, sound growth, numbers that companies are giving a very good outlook that business has in this country.

Q: Do you think the markets are likely to stay rangebound or dip even further from now till the budget?

A: I think the upside is capped. But I don't see a huge downside from here. There could be some downside especially if global indices come down and if there is outflow of money from India. I think earnings numbers are good and there is domestic liquidity that comes in the last quarter especially from the insurance segment. By and large there is a left out feeling among investors and could be an opportunity for entry.

So, I suspect money from different sources will come back into the market. Maybe the dollar carry trade will become the yen carry trade of tomorrow. The positive outlook for Indian equities will gradually resume. Yes, there would be a period of turbulence and we should brace for a period of turbulence in the very near future.