Food Bill passage invite to rating downgrade: Nirmal Jain

Fall in Indian equities in nothing but a reflection of negative global cues and domestic macro economic concerns, believes Nirmal Jain, chairman, IIFL. Passage of the historic Food Bill may be a vote catcher, but from a fiscal perspective it is likely to add to pain, he added.

"If our macros worsen then we are heading to a credit rating downgrade and FIIs may not invest if that happens," he told CNBC-TV18. Below is the edited transcript of Nirmal Jain’s interview with CNBC-TV18 Q: What is your view on the key reason why the market has fallen today and how to approach it from here? A: Global cues are negative. Secondly, as the food security bill does not augur well for our fiscal position as of now as it will put further pressure on the fiscal deficit, it will put pressure on currency also in an indirect manner. This is because FIIs will be worried about the macro picture on one hand. On the other hand the risk of international rating downgrade increases. If India as a country is downgraded then we become a junk category and post that many fund managers and FIIs will not invest. That can further deepen the crisis. Food security bill is politically a vote catcher, but unfortunately, it does not go well with investors. Q: We given to understand that there are a lot of arbitrage trades which short positions in this cash market and long covered in the futures market and therefore, the market maybe save the blushes up until the end of contract, is that also what you are picking up and therefore thereafter next week, do you think we could get some serious pressure on even that 5,300-5,200 levels? A: I do not know about the technical position of the market, but what happens is that once the negative sentiment grips then it has its own momentum. Therefore it will again depend on what kind of global cues we keep getting, but it cannot be ruled out. It is something which is in an environment like this and the bias is always negative. The problem with our nation is it will wipe out hunger, but we need jobs which can get productivity and that is very key for any economy to grow on a sustained basis. There are worries in economy on macro front and that is what is reflected in the market.