Don't see FII flows coming in a hurry: Edelweiss Sec

Although the Finance Minister (FM) has delayed General Anti-Avoidance Rule (GAAR) by one, Vikas Khemani of Edelweiss Securities feels that itself will not get FII flows into the market.

In an interview to CNBC-TV18, he says, to get flows into the market, we will have to see improvement in the macros. “At this point in time, that is not visible to the investors. As a result of that, we are not likely to see FII flows coming in a hurry,” he adds. Also read: FIIs still interested in India, says Samir Arora Below is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying video. Q: We did see that huge rally yesterday, after the anti-avoidance rules were pushed back. What is the sense you are getting? Are there enough inquiries of FIIs coming and looking in to buy? What might be the mood of the foreign investors? A: I think whatever happened yesterday in the Parliament has lifted some amount of uncertainty in the minds of investors, from a short-term perspective. Earlier, investors were getting itchy. The uncertainty was very high. So, lifting off this uncertainty is positive. That itself does not get flows into the market. To get flows into the market, we will have to see improvement in the macros. We have to see some conviction around the market going forward, growth coming back, inflation coming under control. I think for getting fresh money all those things will have to fall in place. Investors do not invest into any country only for taxation reasons. Taxation is one of the advantage or disadvantage depending on country’s provisions, but I think the key driver of the flows is the money making opportunity or return making opportunity. At this point in time, that is not visible to the investors. As a result of that, we are not likely to see FII flows coming in a hurry. We will have to see some sort of change in the broad macro economic indicators. Q: On the back of Cognizant numbers, IT stocks have taken a big beating. It’s down about 3%. Would you worry for the Indian IT space after what you have heard from Cognizant and the cut in guidance or you would use this straight 4% cut that you are seeing as an opportunity to buy? A: If you see the TCS call in February, Infosys guidance in the quarterly results, Cognizant guidance, one thing, which is very clear and common, is that volume growth is slowing down. I think there is no wishing away from that fact. I think it is very clear right now that volume growth and growth in IT sector is slowing down. It could be temporary for a couple of quarters. It can come back later, but currently I think most of the companies are guiding for a slower growth. I think that is a point of worry. Right now, I am not referring to only today’s pressure, but they are holding on by and large post-Infosys results also because in the market there is a shortage of defensive plays. IT in some sense is defensive, given the rupee hedge and all. So that’s the reason I think IT stocks are holding on. But the moment confidence in the other high-beta sectors or the banking sectors come back, you will see IT stocks and consumer stocks starting to underperform. Till that, if macro economic environment does not improve, you will see IT stocks doing reasonably okay, given the defensiveness in form of the currency hedge.