Be on the buying side as major changes are afoot: Udayan

Speaking to CNBC-TV18 Consulting Editor Udayan Mukherjee said that if Donald Trump goes on to win, I still hope there is a twist in the tale. If Trump wins, it is a black day, he said, adding that the latest crackdown on black money will leave a lot of people frozen. “We are in the vortex of US election outcome and locally, he said.

He said major changes are afoot and it wouldn’t be wise to put 100 percent to work today. “Spread out your purchases. You have to be on the buying side. The next month or two will be the next buying phase in the next 10 years. But just stagger it, he said.Below is the verbatim transcript of Udayan Mukherjee’s interview to Anuj Singhal, Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Anuj: Déjà vu all over again, we were talking on Brexit day; pollster got it wrong and looks like they got this one wrong as well?A: I was rather hoping, unlike Marc Faber, that we would not be talking in these tones this morning. If it really turns out that Donald Trump goes on to win as is looking quite likely and unavoidable now I still hope there is a twist in the tail out there. I think it will be a black day for humanity. I won’t mince any words whatever happens to the stock market whether it goes down and eventually bounces back. I think something’s are far more important than money and the market. Today goes down November 9th if Trump wins is a real black day for humanity across the world. As a global citizen, I feel terribly poor and ashamed if this is going to be the turn out of the US elections.However, cutting to the markets now because that is what at hand now. There are twin forces; it is not just what is happening with the US elections but the enormous disruption, which is going to be caused by what happened overnight with Rs 500 and 1,000 notes.Over a longer period of time, we may look back two years down the line and feel that this was a decisive reform that took place in India. Right now, the enormous amount of disruption -- I can tell you that I mean I stay in a small Himalayan Village out here people will be absolutely frozen. They just don’t know what to do. Small and medium enterprises, individuals -- and I think a large part of the Indian economy is made up with such people and such enterprises -- are probably running from pillar to post trying to figure out what hit them overnight. This will have tremendous consequences in the near-term for the economy, for the companies, their ability to service payments and what it needs in terms of the banking system as well.So, longer-term you had to pull the trigger at some point in time. May be we all agree one year down the line it was a fantastic thing to have done and a very bold thing to have done. However, right now we are caught in the vortex of two very dramatic forces what is happening in the US and what is happening locally and a cocktail of that is the recipe for panic this morning.Latha: Three cheers to you for what you have said about the Trump victory as well. This is certainly something which global forces have to take cognisance of. Clearly, we were not prepared for this and we cannot be proud of this moment at all. Similarly, what you speak about the delegitimizing or delegalising of the Rs 500 and Rs 1,000 notes, while we will speak about the real economy and its impact, the immediate suddenness with which it will hit fruit vendors, vegetable vendors, taxi drivers and the whole entire informal economy, the chaos is going to be palpable. I can sense the tension that you must be sensing over there in that Himalayan village. But again, now to drill down to stocks. Is today a circuit down day?A: I do not know about a circuit but there will be serious damage and the point is, this morning, for professional investors, they probably would have walked in this morning giving 80 percent probability to what the polls were saying and in their minds, putting down a 20 percent probability to the worst event. That is how professional investors behave. What if the worst happens? What is my stock list? Will I go out and buy today? But I think it just got very complicated because till last evening, you were going to react to just the US elections. This morning, you are reacting to a huge potential local disruption, plus a US election event, which might have gone against you and therefore, the call is complicated. It is not easy to say if I find great stocks down 8-10 percent. I am obviously going to buy today. Who knows maybe tomorrow presents a better buying opportunity or day after.I remember telling you probably when the Nifty was around 8,900 a few weeks back that one should adopt a systematic liquidation plan (SLP) and today, if the market drops 400-500 points on the Nifty, which is not inconceivable, you do not know whether that is the bottom. On the Brexit day we made a temporary bottom at 7,900. But I do not know whether we can say with conviction that today’s panic will give us a near-term bottom or will it be a slightly more protracted bottom. So, today I tell you that today is the day -- if we start a huge gap down and go on to make lower lows during the course of the day, you reverse that SLP and you start a systematic investment plan (SIP) on the stocks that you like. Do not put 100 percent to work today because major changes are afoot and probably it makes sense to spread out your purchases.You have to be on the buying side. This is not a time to sell and I would not be selling stocks today. If I had money, I would be starting to buy stocks and probably the next month or two will be the best buying phase of the next 10 years in the stock market. Maybe there will be dark days, but I think it will present a great buying opportunity. Just stagger it. Do not make it a one-shot purchase, because there will be a lot of pain and bloodshed over the foreseeable future, if indeed we are now talking with the assumption that Trump is winning and he has not won yet, if he just does go on to win.Sonia: In the very near-term though what do you think the impact could be on emerging markets and how does that stack up versus developed markets because based on the commentary that Trump has made in the past, one worries about the havoc it could create for some of these markets like Mexico. The Mexican Peso is already at a record low, so how do you negotiate that?A: People will panic today and that is the problem. They are frozen, this was not along expected lines at all. I still don't know. I am keeping my fingers crossed, surprises happen with election results, maybe a state or two will swing away. I don't know how this will pan out but more than any individual policy about a particular sector or something the two biggest things are what will happen with his stance towards the global economies and China in particular and that is the fear, which might take global markets into recession.Latha: Your thoughts, we are starting with midcaps down about 8 percent and the Nifty and the Sensex down about 4.50 percent now. They went up to about 6 percent. Is this to be traded at all or do you think this is just a trailer and we are going to see much deeper falls?A: Don’t trade now, I think next few days belong to investors and you should not be trading because you will get butchered and such periods typically are the graveyard for traders. The quantum of movements is so large that you are digging a grave for yourself if you are taking large positions and options.My sense is the midcaps will bleed a lot because there was froth in midcaps. There was a lot of domestic high networth money, which had gone in and even in the fall of the last few days, you had just began to see the first signs of correction or edginess creeping into the midcaps space. But because they had outperformed the largecap universe by such a handsome margin and because valuations had gone to such premium levels, I think the first panic might actually hit because the HNI’s have frozen because of the double whammy today, you might see a more of a valuation contraction in the midcap universe.It will throw up wonderful opportunities as well as I said over the next couple of days this is the kind of period where you say I know six months will be painful or may be but you say you go out and buy what you always wanted to buy but could not because of fear of a high valuations. I think valuation wise you will get an opportunity. The only thing to consider is if indeed Trump goes on to win, what is the nature of its impact on global markets in 2017. Is it pernicious enough to tip the global economy into a recession or is this just a knee-jerk reaction, which the markets will adjust to.Remember tomorrow the market might wake up and say you know what Trump has won and therefore because of the dislocation in markets the Fed will not be able to move in December, which is emerging market positive. Trump will unleash a massive physical stimulus program, which might re-inflate the global economy and therefore there are positives to take away from a stock market perspective. Who knows how this will play out? So, right now I think there will be a huge amount of volatility but what you need to do is to do the same old classic thing.This morning many great stocks are down 10 percent may be in the next few days you will find them lower even 10 percent more and a 20 percent correction in great names is usually a great time to buy regardless of whether you have to witness some more pain and bear some more pain for the next few months or so.For entire discussion, watch accompanying videos...