QE3 not good for India but sentimentally important: Vijay

The 30-share BSE Sensex closed near seven-month high on Thursday, though it remained lacklustre throughout the session. The index, which rose 708 points in seventh consecutive sessions since September 6, gained just 21.13 points today to close at 18,021.16.

Meanwhile, the 50-share NSE Nifty moved up 4.35 points to 5,435.35, but broader markets closed slightly lower.
Sudarshan Sukhani of  s2analytics.com, says that normally, news events should be avoided but FOMC meet is a special event as no one knows the eventual outcome, we are planning to take some long positions. It is important for the traders to understand that events cannot be influenced but volumes can be kept under control and manage risk accordingly.
PN Vijay of askpnvijay.com, says that so far India has been following the global trend. We have been rising with the market, quantitatively, the developed markets have risen  lot more. He feels that FDI in aviation will go through this time and a fuel price hike can be expected in next 10 days. Below is the edited transcript of the interview. Q: The global triggers have played out well, but really nothing has come out of Delhi. Are you still keeping your hopes high or any kind of fuel price hike, diesel etc. or is that out of the window at least for now?
A: Surely, it is not out of the window. So far India has been following the global trend. We have been rising with the market, quantitatively, the developed markets have risen a lot more. The European markets are at 15-month highs and the American markets are almost at 2007 highs. But India still has a long way to go, but I would not say that the current rally is driven by expectations of the government.
According to the oil minister, LPG and diesel price hike is unavoidable and it definitely looks on card and this time the Congress is doing slightly more subtlety. I feel this time FDI in aviation will go through and fuel price hike may happen in next 10 days or when there is consensus. I am betting on infrastructure investment spending. The real problem in India is the gross capital formation and the investment-to-GDP ratio have tanked. I think that will set the IIP ringing again. Q: FOMC meet is a big event globally, what is your expectation for the FOMC this time around and how do you think the markets could possibly react or India in particular would react to it tomorrow?
A: There will be a small knee jerk reaction in the Indian market to the Fed. Europe and policy action in India are two big things. There is no case that there is liquidity shortage in the global economy and in a very perverse way if the QE3 does not happen then the commodity prices will not go up much and oil may get rained in again, which is not bad for India.
So, a QE3 is not very good for India, but sentimentally very important. I expect some action from the Fed and secondly, there would be a knee-jerk reaction positive or negative, but that will not upset the way things are going. Q: How does one approach Jindal Steel and Power in scheme of things that stock has been tanking for a long time now, where do you see the stock price to stabilise at?
A: JSPL is very unstable and sentiment is very bad. In this whole controversy, we are totally missing the point. The basic issue is similar to 2G case, there are two types of cases, one is malafide where wrong information, forged document etc are given and those will be affected surely.
The second is called block squatting where there is no intention of developing it, you squat on it for some time and then sell it for a profit. There are enough clauses in coal allocation that you should complete etc; those may get de-allocated bank guarantees.
For genuine cases like Tata Power, it is backwards integration, who have not got environmental or forest clearances what do they do? I don't think the government will de-allocate the blocks whatever operators may say because they will be immediately be set aside by courts. On one side, the government says that they are de-allocating and on the hand they are not giving environmental clearance, it is absurd. So if you have not done anything malafide and squatting then block cannot be cancelled. Q: How would you extrapolate it to the health of the banks at this point in time because we have seen them suffer from particular cases such as Deccan Chronicle and now the repercussions of this entire coal scam etc? How are you placed on the banking space?
A: I don't think for example a loan to Tata Power or somebody would be downgraded because these are corporate loans. Cases like Deccan Chronicle are bad. On asset quality, I think the additions in the last quarter have been rather small. For the Indian banking system, a Deccan Chronicle write off of Rs 900-1,000 crore is very small indeed and they have all lost considerable market cap.
Last time, there was no large write offs in Global Tele and Kingfisher and it is possible that the power sector restructuring will lead to some improvement. The overall gross NPAs of banking system would not increase and especially of the private banks that have been extremely cautious in their exposures.