Cyclicals to give better returns, like pharma: Edelweiss

Below is the transcript of Vikas Khemani’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: What is the gut about the market? There is global liquidity pushing up but do you think now the fact that 9000 was distinct dream is going away, you think that chances are reopening that we will conquer that level again? A: Whether we will conquer that again, the answer is very much yes; the question is of time. So, in my opinion markets are right now in a consolidation mode. What you are seeing is – we saw decent correction coming in because expectations were build and the numbers slow to come by in corporate earnings on the ground level on most of the counts and market were kind of little ahead of expectation. So, to that extent corrections have happened. I do believe that this quarterly earnings may also not be very strong, next quarterly also may not be very strong. So, to that extent you might see a consolidation in a narrow range but structurally this is very well placed market from all perspective, macro perspective and government is making all right moves again in a structural manner. So I do believe that investment will definitely pick up albeit it will take time to reflect into the numbers, into IIPs, into all other macro numbers. However, that will take time and in my opinion now you will see market gradually moving up.So, the first reaction of market is over, now, you will see consolidation and I do believe that this financial year also will be good. I think numbers will be probably picking up in second half of the financial year. We have had two rates cut, probably we will see one more rate cut today and that will set the course. Global environment is fairly good so I don’t see any reason for being negative on the market and most importantly now expectation of the market for this quarterly earnings also is set. You won’t find anybody who is bullish on this quarterly earnings or maybe next. So, to that extent market is well placed. There could always be some exogenous factors where you can’t expect some global font something happens but those are always there.

Sonia: You said probably we could see a rate cut today. There is no case being made for a rate cut because the Governor would rather just wait for a couple of more days to see the next inflation print. Suppose there is no rate cut today then will the market be disappointed? A: I do not think. If you look at most of the surveys, yesterday there was survey’s in news paper and by and large market is not expecting. Consensus is more towards rate cut not happening. So, to that extent if it doesn’t happen I don’t think there will be big disappointment. However, I do believe that there is a good chance of rate cut happening in this policy because you can’t get a better timing than doing rate cut now. Let us assume that inflation data though it is sometime away but I think you know the trajectory. There is no case for inflation going up at this point of time both imported inflation and the domestic inflation. So, you have data wise comfort. Sometime away you are staring on the US rate going up so before US starts increasing if at all they increase that time it will be difficult to cut the rates when US is increasing so you might as well right now sort of set the context. So, I do feel that there is a very good chance and you have a strong rupee environment so there is a good chance to today see a rate cut happening of at least 25 basis points.