Mkt looks good for long-term; RBI may not hike rates: IIFL

With the market stabilizing after falling like nine pins over macro concerns, Nirmal Jain, Chairman of IIFL feels it is a good idea to stay put for long-term investors. He sees a lot of positive cues — domestic as well as global — that bode well for Indian equities.

“India has a much better potential and a long-term ability to attract equity capital as compared to debt and that is what our policymakers and government should focus on,” he told CNBC-TV18 in an interview. . On the monetary policy front, Jain does not see RBI governor hiking rates any time soon. In fact, he says Rajan is likely to ease liquidity in market further. Also read: Seeing signs of economic recovery, says Axis's Nilesh Shah Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is the sense you are getting - Nifty is at 5,900, you think this is a level for profit taking for both traders and investors? A: Market sentiment has stabilised and if you are a long-term investor then I would say stay invested. Quite a few things have turned positive a bit all of a sudden. In fact our new Reserve Bank of India (RBI) governor Raghuram Rajan’s speech may go down as the turning point for the market for the entire sentiment as such. However, there are quite a few positive cues from the global front as well that were not there when he spoke such as China’s trade data has come positive, the receding Syria strike fears, back home too other than good monsoon we are seeing that auto numbers have been strongly positive for Maruti Suzuki and the trade deficit data shows that with a weaker rupee our exports are becoming competitive and in fact the trade deficit may further shrink over next few months. All this augurs well for the market. Other than that we are also seeing hat Coal India is moving and the long standing problem for power companies and power plants may get resolved to a large extent. This coupled with quite a few bills that Parliament has passed. So the sentiment has turned positive. If you noticed, FIIs have been although on a moderate or a small scale but they have been buyers for last two days. From India’s point of view, India has a much better potential and a long-term ability to attract equity capital as compared to debt and that is what our policymakers and government should focus on. Q: In this manic depressing market, Raghuram Rajan’s speech was met with a bout of ecstasy but we all know the limitation that a Central Banker has with a government like this - how much more follow-through do you think the Central Bank can do and what are you expecting to hear in the monetary policy, obviously he cannot go ahead and cut rates, do you fear that there could be a hike perhaps this time? A: I do not think so because this is a country which is different from rest of the world. We have almost 15 million people getting added to workforce. The demographics are such that more than 60 percent of people are less than 35 years of age. So this is a country which needs investment, which needs growth. If I have to summarise, one word that can solve most of the problems is growth because not only will growth over the medium-term to long-term will have a positive impact on inflation but immediately also it will have impact on FIIs sentiment and therefore equity flow and everything else. So, I doubt that the RBI governor will increase rate. He may not cut rates but he will at least ease liquidity and he has very strong reasons for that. He may surprise with the rate cut also that I cannot comment on.  RBI governor has gone with a very positive reform-oriented pragmatic mindset knowing how the environment is in terms of industrial growth, in terms of overall employment and the gross domestic product (GDP) situation; it is more likely that his stance would be growth oriented rather than tight monetary policy, which has been RBI’s hawkish stance for last few years. I think there will be some changes there. Q: Speaking of monetary policy and the cost of money, you are yourself in the market for raising money through debentures - do you think that non-banking financial companies (NBFCs) raising money could be stuck with some high cost money at this juncture? A: We look at it as a systemic investment plan (SIP). We also raise this kind of money every year, it is a rotational thing. It is very difficult to take a call on interest rate but when you have an ongoing business and when you are lending at the current rate and since most of our portfolio is for 3-5 years, where we lock-in the interest rate in our assets. So from that point of view, it makes sense. Two years ago when we raised our first bond issue, that time also people made similar statements that interest rate might go down and I too thought interest rates might go down but in reality they did not go down. Therefore, it is very difficult to take call but it is a small part of our total resources and we do it every year. So it evens out.