Mkt won't fall off cliff; buy ITC, OMCs: Pashupati Advani

Though a lot of people are sitting on the sidelines given the global uncertainty, Pashupati Advani of NBIE is hopeful the market will not fall off the cliff and the Nifty will stay above 5000 levels.

“I am not as bearish as other people. I am not so concerned about the market. The issue is for dollar investor, he is getting a raw deal as the rupee gets weaker. The non-deliverable forwards (NDFs) and the covers have gone out of control,” he told CNBC-TV18 in an interview. However for rupee investors with a long-term time horizon, this is the time to buy on dips, he recommended. Unlike most market experts, Advani is not too gung-ho on technology stocks. But he is confident on India’s consumption theme.  Cigarette major ITC is his old favourite and remains so. He is also positive on oil marketing companies (OMCs). Below is the edited transcript of Pashupati Advani’s interview with CNBC-TV18 Q: Do you think this bear market will have legs beyond 5,650? A: Everyone is in confusion right now and they don’t know what the hell is going on. On the one hand if the market has gone up, on the other hand you are getting very mediocre to downward macro numbers. So, a lot of people are sitting on the sidelines. I don’t know if yesterday’s numbers are a true reflection because US markets were shut, so a lot of things don’t happen there. But I don’t know. This is tough time for all of us and what is more worrying is the dollar and not the market, I am not so concerned about the market. Q: Would you still go ahead with the export sectors, with the IT space given the macros? A: I am not so gung-ho about the IT sector although all the IT stocks seem to be making all time highs with the rupee at 66/USD and having gone up to 68/USD. But I am more comfortable with the consumption story because it still continues. One of your panelist had said that rural economies are growing so it is very difficult to stop the super tanker. You may try and close the valve in Mumbai and in Delhi, but out there people are still buying real estate, cars and two-wheelers. So buy is happening in a limited way. Q: What about the global recovery story, we are getting good data from China, we have got good data from Europe as well, do you think the export story therefore has more legs than you gave it and then how will you play it? A: The quantitative easing (QE) according to me is not going to slowdown. I don’t think it can and therefore things will go back to normal. The Chinese have basically said that their manufacturing has gone up, which means they expect QE to continue. Obviously export oriented firms are going to do well and what is happening is Indian manufacturing firms are now looking more at exports particularly in auto sector for example. Q: No one can predict the bottom in a bear market but if you had to stick your neck out and tell us if you think this market is headed well below 5,000, what would your view be? A: I am not as bearish as other people because I feel that we have got a lot of inflation which hasn’t gone away and that is going to keep the markets at more than 5,000 levels. The issue is for dollar investor, he is getting a raw deal as the rupee gets weaker and weaker. Non-deliverable forwards (NDFs) and covers have gone out of control I would say. _PAGEBREAK_ Q: What is your sense about how the markets might react when there is pullout, are you expecting that foreign institutional investors (FIIs) could turn big sellers when the tapering happens? A: I don’t believe that tapering is going to happen and the reasons for it are many. One is whoever is going to take the chair in America will take time. People have asked me, we have got a new Reserve Bank of India (RBI) governor starting yesterday and what is he going to do? I say, first he is going to get in the chair and figure out what is going on and who is doing what. That is the time; you cannot just walk in there and start shooting bullets. So there is a lag likewise, in US the issue is even bigger. It may take three-five months, so I don’t think they will even think about tapering till about April-May next year. Q: How do you approach this market because we have noticed that in this fall domestic institutions have been buyers, they have bought more than Rs 6,000 crore in the month of August? Is this the good time to be putting in money and if yes, where? A: People are buying on dips. I would also say that I don’t think the market is falling off the cliff and certainly for a rupee investor, equity is a nice place to look at. Look at the long-term and look at what India Inc is doing. Every large promoter who has got money is increasing his stake, is doing a rights issue. Even foreign promoters like Hindustan Lever and Diageo are bringing money into India. It is a long-term play. I read an article saying that Coca-Cola is planning to spend USD 5 billion in next five-six years. Everyone is looking at India and saying this is a time to get in - it will be a little bit lower and a bit slower we know that, but the thing is there are 2 billion people we are going to sell our product to. Q: What about metals that has been the flavour for the last couple of weeks especially, the rupee depreciation giving them some support? A: China is going to be the leader. We are hearing some numbers. I have not seen whether metals are showing better which general manufacturing is. But that will be the driver because if China metal shows up then we will also follow. The other main thing is that there will be some rationalization and in India we are going to shift back towards the middle because all of a sudden financial necessity is going to make us do that. We need to be back to exporting or we need to be back to exporting coal which again doesn’t happen overnight. It takes time, but the thing is if the will is there, people will start bringing money back to India.