Too early to rejoice but see deep value in mkt: Blackridge

Arindam Ghosh, MD and CEO, Blackridge Capital Advisors feels the actual recovery in the market will take much longer and cautions investors not to get euphoric at this stage as any reversal of flows in the Indian market can make Nifty retest 5,200. However, he believes the positive factors globally and domestically have given confidence to investors and they may start buying with a two year perspective.

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In an interview to CNBC-TV18 he says that investor confidence will build up in India if investment climate improves and growth revives. Conviction- buying, key barometer of investor confidence, is yet to happen. Below is the verbatim transcript of Arindam Ghosh's interview on CNBC-TV18 Q: Do you think we have put behind us the levels of 5,100-5,200 that the market was fearing because of the improvement both in global as well as in local macro data?
A: There has been a deluge of good news from across the world and it is all bunched up together. We heard President Obama’s speech this morning and therefore, the clouds of war which gathered over West Asia are now drifting. Now we are hearing good news, Greece’s announcement that they are going to end up budgetary surplus only reconfirms the belief that the euro zone is on a far more enduring process of recovery.
But the data that came out from China both in terms of the industrial output as well as the sharp spike in credit growth is the most important. It has helped to boost the sentiments and has a stabilising effect in this part of the world. When you combine that with the change of regime in the central bank with the measures announced both by the central bank as well as Parliament, they have gone a long way to lift the over pervasive gloom that we have seen engulfing. So, there is a fair amount of traction building up globally.
It is good to see that there is a bit of a turn in sentiment, which is the first step on the long road to recovery. But, one should not get blown away. There are too many variables, which are at play and one would have to wade through this period to see how various measures that have been taken start to play out. The process of recovery will indeed be long and therefore, we should not get euphoric at this stage.

_PAGEBREAK_ Q: How are you approaching India, after all what we saw here is more band-aid from central bank in terms of allowing a little more non-resident Indian (NRI) funds by giving them some attractive swap facilities, is the Indian market worth buying at these levels, any sectors?
A: Firstly, we had to change the negative sentiment which was pushing everything into darkness and so, that is a good beginning. There are many variables that we keep hearing like the economy has bottomed out but it is very hard to generalise, you have different variables and anyone of them can spoil the party.
If one looks at current account deficit (CAD) it is likely that we have bottomed out and same goes for inflation. But growth will be the biggest casualty of the currency depreciation that we have seen at the measures taken to contain it. So, growth has to come back and that is the most important variable and the cog in the wheel.
Until we see visible signs of improvement in terms of the investment climate, it will be hard to take a view or get into a position where you start adjusting your portfolio. So, if you are underweight, there is no overpowering reason for you to get into a neutral or overweight at this point in time unless a lot of these factors together give a lot more confidence to increase exposure.
Overall, if there is stability in the region, as of now the biggest beneficiaries of what we have been saying has largely been confined to north Asia but for India to start attracting capital flows, we have seen a bit of nibbling on the margin but for the traction to build up, we will have to restore the confidence in the economy and that can only come if there is a revival of growth. Q: Are you suggesting that there is no point putting any money to work at this point in time because we are seeing a lot of blue-chip names in the last couple of days, the Bharti Airtel, the Larsen and Toubro (L&T) and HDFC? Do you think this is a good time to put money to work or do you think that you should just wait?
A: The index has not been reflecting what has been happening with the stocks and the way the prices have moved. So, there is deep value in the Indian market and from more than two years perspective, one can start nibbling. We all know that there are key meetings and announcements that will happen in September and so, everybody is on a wait and watch.
We would like to see and hear what announcement comes out of Fed before jumping in. Clearly, there is a fair amount of restoration of confidence that has happened over the last one week which has to get further built on and that is when we will see some conviction buying happening. Q: Do you think if the Fed were to sound hawkish in the FOMC meeting statement, we could see 5,200 getting challenged again?
A: It is difficult to call index levels from here but, on the downside we can test those levels. If we see some sharp reversal of flows that is a distinct possibility and we all know that markets on the downside, the momentum is a lot more than what we see when markets start moving up and so, it is a possibility that we cannot rule out.