The market on Tuesday, post the Reserve Bank of India (RBI) policy and the strong rally it has posted on Friday and yesterday, saw some profit-taking. Is this an indication of a correction?
According to Nirmal Jain the market had already run-up substantially and so is likely to consolidate, making investors selective. However, the underlying current still remains bullish and money will continue to flow in.
The next big trigger for our market could be the progress on goods and services tax (GST) in terms of the Bill, the standard rate and especially if the rollout could happen by April, 2017. Market would also keenly watch the US Fed hike decision and flow of foreign capital.
His advice to retail investors is to invest systematically for the long-term and those could be via investing in mutual fund. If one is a large investor then he could look at investing with a bottom-up approach said Jain.
Reacting to the RBI monetary policy, he said it was on expected lines but market seems to have taken comfort from the fact that the stance of the central bank will remain accommodative and liquidity will keep coming in by way of OMOs. According to him as long as liquidity remains easy, interest rates will head down.
However, he is cautious about stocks in the financial space that have already gone to dizzy heights but says fundamentals of these companies are still good, so long-term investors could stay put.
Sector specific, he thinks with good monsoons one should look at related sectors like FMCG, two-wheelers, agri-based stocks. Government spending could also give a boost to sectors like road, power, cement etc
Talking about the strong DII number seen yesterday, he said it is sign that domestic money is flowing back into equities. It is likely these investors would like at private banking space.
On August 8 domestic institutional investors pumped in almost Rs 500 crore.Below is the verbatim transcript of Nirmal Jain's interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Sonia: We have started to see the first signs of profit taking in our markets. Do you reckon a correction is likely?A: Markets had run up quite sharply and therefore correction is likely, so for retail investors advice is always same that invest is a long term perspective don’t over leverage and keep investing systematically, so you keep investing at all stages of market. Typically, a very small investor is always better off investing in a mutual fund in a systematic way, but if you are a little larger investor and who want to invest in direct equity then also you should do bottom up stock picking. If you like the stock invest, don’t worry about the market levels, they will keep moving up and down.Anuj: How much correction do you foresee in the near term, considering that we haven’t seen once since the post budget rally?A: I am not a technical analyst, so I really can’t comment on how much correction will happen in the market and I think from an investor point of view it is really difficult to predict, so everybody come and give any level as a support level or a resistance level, but I am not good at that.Sonia: So what about the credit policy is there anything from a market standpoint that’s important?A: Credit policy has been mostly on expected lines, but the market has taken comfort from the fact that Reserve Bank of India (RBI) stance will remain accommodative and they will keep providing liquidity by way of open market operations (OMOs) or whichever means appropriate, so as long as the liquidity remains easy and benign in the market, interest rates will head down. For full interview, watch accompanying video...
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