Mkts to start stabilising: ICICI Pru MF

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Religare Enterprises lists at 75% premium Acme Tele Power to enter capital mkt, files DRHP with Sebi Will mkts depend on internal cues on Friday? Today will be interesting, crucial day for mkts Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

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Q: What do you think, is the worst over or you expect the market to be quite volatile as it finds its feet over the next few days?

 

A: I think markets will remain a little bit volatile and the worst is certainly not behind us in terms of will there be a day when the markets will fall down by 200-300 points surely it will. But clearly as I mentioned that the rupee is likely to be defended by RBI. Secondly the subprime related worst is probably behind us and we have seen subprime related bids emerging on the CDOs and stuff like that. Thirdly, the valuations, which were looking excessive, have come down a little bit and look reasonable.

 

Net-net if I have to take a call markets will be volatile little bit here and there but every correction is an opportunity to re-enter the market.

 

Q: How are you approaching the fertilizer space after the recent run up and the subsequent correction?

 

A: In the recent times India has started importing more urea than what it is producing and from a long-term agriculture point of view or long-term security point of view that is not the desirable state and clearly the fertilizer sector over the last years have been neglected in terms of investment because the government has not been clear in terms of subsidy, in terms of capacity creations and so on and so forth.

 

We feel fertilizer sector now will receive the attention as the food scarcity starts looming over. Second is the threat of imports vis-à-vis local production starts getting factored into and we could see some sort of capacity creation, expansion, which again will be positive for this sector.

 

So fertilizers stocks which have factored in this positiveness have moved up on this basis but selectively some fertilizer stocks still looks good clearly that is one sector, which can be looked at from a long-term point of view.

 

Q: What is your sense of how things might shape up over the next few months as things unravel by way of the global subprime mess that we have will we continue to remain this volatile but still outperform the rest of Asia or do you think what we had up until now was a strong patch for us and we may slip a bit?

 

A: I think the events, which one needs to look on forward is one will Fed cut the rate again to support the Wall Street investment banks or US economy and kind of bail that out. As of today the Fed futures are not suggesting any cut this year and probably one more cut of a quarter percent in next first quarter, January to March '08.

 

If that happens then probably dollar will continue to depreciate against other currencies which means it makes sense for people to invest from dollar assets into non-dollar assets and emerging market equity will continue to be preferred assets over there.

 

Today India in terms of valuation is at a reasonable premium over most of the emerging markets but still vis-à-vis China looks fairly cheap and will be looked as preferred investment option. So we have to watch out on two things, one how the Chinese stock market behaves and if there is a massive correction in Chinese stocks market then the differentia between Chinese P/E and our P/E will narrow down and that will put pressure on our market.

 

Secondly, will dollar continue to remain depressed or soft because of the expected cut in the Fed rates and which again kind of keeps on moving dollar assets into non-dollar assets including emerging market equity. So two things to look out for from a global point of view in the next couple of months will be Fed rate cut and the Chinese stock market.  

 

Disclosures:

 

As a fund manager I have positions in the market.