The market on Wednesday were initially clocking some considerable gains at one point but banks dragged the indices in the last hour of trade. The Nifty managed to close at 6,120 but ended the day with marginal losses and the Sensex too lost over 30 points to close at 20,647. In an interview to CNBC-TV18’s Shereen Bhan, SP Tulsian, sptulsian.com talks about the impact that the global meltdown can have on the Indian market tomorrow.
Also Read: Fed poised for USD 10 bn taper as Bernanke bids adieu
Below is the verbatim transcript of the interview.
Q: It is not looking good. The SGX Nifty is down 90 points. What do you anticipate for our markets in opening bell?
A: We cannot take respite from today's movement neither on account of the FII because even FIIs have been buyers in today's market by about Rs 250 crore. We have not seen much corrections taking place in our market. Actually, the rhythm of our market broke from Friday when the Chinese concerns started and thereafter, the currency weakness in the emerging markets.
However, the ultimate direction for our market could be that if Fed for some reason delays the tapering of USD 10 billion which is expected for which 11 percent of the analysts in the US feel that it is likely to go through, but let's not forget that in the Indian market the analysts were saying that RBI repo rate hike will not come and 95 percent were saying for that event to happen but it has happened other way.
So, for some reason if the tapering doesn’t happen by USD 10 billion we can see a positive for our markets. We may see SGX Nifty remaining weak may be by about 25-30 points.
I don’t think more damage can really be expected from all these developments beyond 90 or 95 points. You can expect that to remain maybe in double digits.
However, if the Fed goes for tapering of USD 10 billion then we may see further weakness and that will be very bad and we should remain prepared to see Nifty at 6000 level tomorrow being our expiry day.
Q: You are still hoping that the Fed will postpone its taper programme but what if the commentary that comes in from the Fed is more hawkish? You are talking about 6000 if things play out as per plan and as per script. If the commentary is more hawkish and we continue to see meltdown as far as global equity markets are concerned overnight, what then?
A: In that case you have to remain prepared that the FIIs will start exiting from emerging markets. They have been pumping in money maybe from October 10 into our market and we cannot expect that to continue for such a long time but the best part is that the local insurance companies or the DIIs have started pumping in money. That we have not seen happening today but from hereon, with no pressure of the government, government has mobilised the money that they wanted. So, now I don’t think that LIC kind of investors will really have to make the provisions to salvage the government or to help the exchequer. If that money starts coming into our market, it will be a good counter balance to the FII exits.
It all depends on the FOMC commentary, the move taken by the US Fed. However, I am keeping a close watch on tomorrow's movement. If the Nifty settles or gets corrected in one go even to the level of 6000, I am not seeing much fear going forward in the month of February except banking and finance stocks.
Q: How vulnerable is the banking and financial space? That was what took the markets down again today. We have seen a whole amount of weakness coming in as far as the banking sector is concerned. Do you believe it will continue to be the big laggard and the most vulnerable sector?
A: That will be a big laggard because if you take the victim of the Fed move it is going to be the bank and finance stocks.
In month of February you have no trigger because all the private sector banks have come out with good numbers, market has already digested and factored in the valuations. What we are really left with is the PSU banking results. We have not even seen two or three banks. All the big banks are now due with their results. It will start from January 31, we have 6-7 banks lined up which will all declare their results maybe by February 10 and which are likely to be very bad. The concerns on the asset quality, the situation going forward because the kind of indications which ICICI Bank has given of the restructuring pipeline for next couple of years are going to scare the market for all the PSU banking results.
People will be looking to hide some things and the defensives IT, FMCG and pharma will continue to remain the favourites of the market but banks and finance will take a brunt. I see 6000 as a good support but I do not know how much damage caused by the bank and finance stocks can really get recouped and recovered by those three defensive sectors.
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