Global flows to support if mkt corrects: Elara

A: You rightly said that all the triggers which were to drive the market internally from India point of view, we have seen it. Budget was the last one. Then of course we have events like coal auctions, spectrum auctions but they are sector based events. So, right now there is no trigger except some macroeconomic numbers which will come out in due course so, we are also expecting that market might trade in a very ranged fashion.

Maybe once we start getting some good economic indicators or some major policy announcement from the government. That is where we will see that market might move up again but we expect market to either correct and it might open up a new opportunity to invest or it will just remain range bound.

Latha: From you vantage point in London, how are you looking at this entire Fed rate hike syndrome? Is this going to leave Indian equities well alone with only minor gashes or will this be a more important issue to handle with liquidity actually getting expensive and therefore less, is this a well discounted event or will there be still some thing to discount?

A: If you see the Fed committee meeting and the post announcements, there is positive news. The market was pricing in that there will be increase hike in interest rate in June but now the probability is very low for the June hike and the hike might be in September and also if you look at the Fed estimate for the interest rate hike they have also brought it down by 50 basis points. So, this particular Fed committee meeting was very positive for the market and now coming back to your question that whether this marginal increase in Fed rate is going to have any impact on India, it is not significant.

We are talking about 50 basis point odd increase from here and as far as equity market is concerned, I do not think this is going to have any significant impact. There will be some sentimental value attached to this because once the US market becomes attractive, lot more money can go there but a debt market there is a possibility that we get a lot of money in Indian debt from FIIs.

There might be an issue there because Indian interest rates are coming down and Fed rates are going up so the gap, the arbitrage what we have in the rupee debt, that might not be there or that might not be very attractive so, we might see inflow on debt side coming down. For our equity side I don’t see it has any significant impact.

Anuj: So, you do not see any impact but what about incremental inflows. Do you think there is still a lot of money waiting on the sidelines to enter this market if and do you think if the market corrects more, there would be support from that money?

A: Yes, there is no doubt. What we have seen money coming into especially portfolio investment, money coming into India is very small amount compared to the liquidity globally what we have. Now whatever is happening in US I am sure that will get offset by liquidity coming from Europe because now quantitative easing (QE) is starting in Europe so, I do not think so this is a problem of liquidity.

What problem we have is how do we absorb that extra money which is available in the system because we do not have; our ability is very limited as far as inflow is concerned because market does not have that bandwidth to absorb that cash flow coming from outside. So, my view is that if the market corrects, more money is bound to come in to support it because people are positive about India.

If you look at emerging markets, India is standing out, everybody is talking about India and particularly so with the slow down in China India is becoming very important but the people are waiting at the macroeconomic numbers, people are expecting that our GDP rate is going to go up, interest rate is going to come down, inflation is going to come down; it will create a very conducive environment for investment to capital market. So, we have to see the numbers and we have to see whether government is going to come out with more reforms and rationalisation policies.