For Yes Bank’s shareholders, the ideal time for a selloff was when Rana Kapoor sold around levels of Rs 60/share, now the investor should decide depending on his asset allocation, Umesh Mehta, Head of Research, Samco Securities, tells Moneycontrol’s Kshitij Anand.
Q. It has been a volatile week for the Indian markets with the Nifty firmly slipping below 11,000 levels with massive wealth destruction. What is the way ahead for Indian markets and what were the factors that led to the destruction?
A. A mix of factors led to wealth destruction on D-Street this week. Concern regarding coronavirus (COVID-19), the Yes Bank saga and the economic slowdown together drove the Nifty below the 11,000 mark.
Markets flip-flopped between fear and greed and an uptrend is expected after the peak in fear which is where we are currently at. Hence, we hope for good times soon from a short-term perspective.
Q. What are the important levels to watch out for the coming week on Nifty and Bank Nifty?
A. In the coming week, 10,800-10,850 would be strong support levels for the Nifty50 with resistance around levels of 11,400. BankNifty, on the other hand, is expected to take support in the range of 27,000-27,400.
Q. What is the way out for Yes Bank's shareholders? Has it become a trading play? What about those shareholders that have indirect exposure through funds that invested in the bank?
A. Given the size of the State Bank of India (SBI) and LIC, it will be a small investment compared to their balance sheet size and should therefore not be a cause of worry for SBI's investors. However, the upside could be huge for them given that Yes Bank is a significant player in the private sector with a loan book size of Rs 2.2 lakh crore.
As far as Yes Bank’s shareholders are concerned, the ideal time for a selloff was when Rana Kapoor sold around levels of Rs 60/share. Now an investor should decide depending on his asset allocation. If Yes Bank is insignificant in his portfolio, then they may wait for the restructuring to happen. But if Yes Bank is significant, then they should reduce significantly.
Q. Any important event which investors should watch out for in the coming week?
A. The key factors to watch out for in the coming week would be how financial markets adjust to the liquidity squeeze arising out of the Reserve Bank's moratorium on Yes Bank and whether COVID-19 escalates.
Q. What is your near term target for the Rupee vs USD? What are the sectors or stocks that are likely to be impacted the most? Can IT and Pharma ride the COVID-19 storm?
A. Rs 74.50/$ would be the near-term target for the Rupee compared to the USD. Investors should look to accumulate leaders from private banks, non-banking financial companies (NBFCs), Information Tehcnology (IT) and Pharma sectors in a staggered manner for value investing.
Q. Yes Bank debacle comes after the Punjab and Maharashtra (PMC) Bank. What does it say about the banking system that both a private and public sector bank failed? Would this weigh on financials for some more time?
A. Apart from having a strong regulatory framework, the legal framework also needs to be strengthened to punish culprits with heavy consequences - which is lacking in India.
In developed countries, CEOs of fraudster companies are put behind bars for decades--for example in the Enron case, CEO Jeffrey Skilling was sentenced to 24 years imprisonment--which acts as a strong deterrent. India needs to have such a strong legal system.
As far as markets are concerned, financials especially public sector utilities (PSUs) could remain under pressure for some time till the situation is under control and panic settles.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.