Elections results to have short-term impact on mkt: IIFL

Long time market watcher Nirmal Jain of IIFL is optimistic about the economy and believes that the worst is behind us. He says most investors are of the opinion that whichever government comes to power, there will be clarity of thought and action, and reforms will get a push.

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He feels if the BJP comes to power in two of the five polling states, even then there won't be a reversal of trend. Though it will be a setback.
While Dipan Mehta, member, BSE & NSE, agrees with Jain and says the broad macro trends are improving and even if events in the month of December are disappointing, there will be minor setback, but then the market will pick up from there and move along. Below is the verbatim transcript of Nirmal Jain's interview on CNBC-TV18 Q: Your opinion on the market situation currently because we have seen quite a bit of volatility over the last couple of days, what is your call as we head into election outcome?
A: Today the market consolidated but the underlying trend is quite positive. If you look at the market for the last six years then there are very few select stocks that foreign institutional investors (FIIs) have owned, they have performed well but the broader markets and most of the markets have been bearish. So, looks like the worst is behind us and most of the investors are hopeful that in terms of election results, whichever government comes to power but we will have clarity of thought and clarity of action also and reforms will get the push and that is what people are looking forward to that.
If you look at the macro numbers particularly current account deficit (CAD) numbers, the crude oil prices and even the Purchasing Managers’ Index (PMI), all are moving in a positive direction. So, personally I am an optimist and I would like to believe that the worst is behind us and the market from hereon should be positive and should give positive returns to the investors. Q: Would you hold on to that view if for instance the BJP came to power in only two of the five states that have gone to election or going to elections and results that we will discover on Sunday or do you think that the market will be disappointed because they were hoping for better a showing from the BJP leading up to the national election?
A: I think there will be a temporary setback but there won’t be a reversal of the trend. The market as of now is driven by FII money and FII money – of course they will be disappointed a bit but new scenario will emerge and they will look forward to central election. This is a bit contrarian because many people think that if the election results are negative then everything will like a doomsday kind of a thing but I think there will be a corrective phase, market may be disappointed for a week or two but it will come back to positive territory again. Q: Let’s talk about your non-convertible debenture (NCD) issue, how much money did you manage to raise and what was the demand level?
A: It will open on December 12 for public subscription. It is from our housing finance company and Rs 250 crore is the base size and with green shoe we can retain up to Rs 500 crore, the coupon is 11.52 percent which works out a yield of 12.15 percent. These are secured bonds against home loan and mortgage receivables. Q: You raised some money in September as well with NCDs. So, why this second tranche and are there further offerings that are lined up?
A: The first was our non banking financial company (NBFC) and this is a wholly-owned subsidiary company of NBFC, which is a housing finance. NBFC is regulated by Reserve Bank of India (RBI) and this is regulated by National Housing Bank. There the businesses are different. Now our housing finance company also has come to a size that it can go to public market and this is inline with RBI policy that is encouraging that not to be dependent only on wholesale sources of funds but try and balance it with retail sources and that gives stability to resource raising as well as the liability side of the balance sheet.
It is difficult to say the timing but they will become an annual feature from both the companies separately.