Fed move to take centre stage; see no hike ahead: Edelweiss

Below is the verbatim transcript of Vikas Khemani's interview with Latha Venkatesh, Anuj Singhal and Ekta Batra on CNBC-TV18

Latha: How do you think the markets would react from here on, would they go with the positivity that the rate hike is out of the way now and therefore there is no need to be down the Bank Nifty any more?

A: One local policy rate uncertainty is out and I think the guidance is more important and it has been given very clearly by the governor and also I think he has made a statement that growth is concerning. So probably very clearly now you don't see much more hike going forward. Obviously it is data dependent and we will have to keep watching the data but at least some indications have come and in that sense it is a lot more dovish.

So as far as the equity markets are concerned the local policy event is out and that is over but we still have some major development event in this week from the international markets around the Fed meeting and I think that also will be very important in terms of deciding the direction of the market, what kind of decision gets taken and I think that will be very important. As far as the local event is concerned I think market will take comfort from the guidance than the real event of the repo rate hike of 25 bps.

Latha: So you are saying that the markets are not going to fall further because of this rate hike, they are kind of over and done with reacting to it?

A: Yes as far as local event is concerned I think they are done with it. But we still have significant events lined up in this week and they will decide the direction of the market in the future - what will happen in the weeks to come and if Quantitative Easing (QE) tapering whatever announcement comes I think there is a larger extent of QE tapering happening then probably market will become more edgy and we will have to see how currencies and rates react to that.

Anuj: Do you think the last couple of days have changed the market sentiment and have changed the way investors would approach the market because the fear factor has come back which was not there about one month back?

A: Absolutely the talk has now moved to global issues than local issues and with this policy the local issues are again over. So I would probably tend to think that the market would look at global clues for now in the shorter-term. This week we have the Fed policy so what kind of guidance we receive from there and that will probably decide the future course of action. But there is no doubt that in the short-term markets are looking quite heavy and probably might correct from here.

This is again a short-term view but if you take a medium term to slightly long-term view, this is going to be a nice base forming exercise and this correction of base forming could be 5-7 percent that is anybody’s guess depending upon how the global macros pan out, global events pan out. But if you take medium to long-term view I think this will be a great opportunity for equity investors to buy Indian equity markets because within the emerging market crisis also if you look at India, it is better placed. The slowing growth in China would probably lead to commodity price coming down which is good for India. The overall construct of our economy is such that if we get a favourable election outcome which is most likely where it is headed towards then we might see investment cycle picking up. So if we can overlook next two-three months, I think equity environment would look much better but these two-three months would be fairly volatile as it looks like.