Mkt in wait & watch mode; India to perform better: Kotak

Also read: Investors vastly over-leveraged on Modi trade

Below is the interview of Sandeep Bhatia, Executive Director & Head-Equity Sales, Kotak Institutional Equities with Senthil Chengalvarayan and Menaka Doshi of CNBC-TV18.

Menaka: Markets have held firm through the course of this Vote-on-Account (VoA) or interim-budget speech. Is this a market shrugging off this event saying okay it has come, it has gone, it is done with and it doesn’t matter outside of maybe a few auto stocks and a few capital goods stocks or is this a market that is actually showing some approval for Chidambaram’s ability to rein in the fiscal deficit?

Bhatia: In my view is that all Budgets have to be seen as part of a moving picture or a movie. We have to see what the underlying trends are rather than just pin-point this number in this year will be achieved by some mechanism right or wrong but a number would be achieved. I think that the market is not focused on this Budget. All Budgets are more a media event rather than an economic event. The economy operates every single day, the mood and the decisions are taken every single day, even on holidays so clearly that over a longer period of time is the agenda of the next government. While all of us talking about this, the market is looking past this Budget and hoping that we have a better policy environment and a credible government which can put in place the drivers for stronger growth and that stronger growth will not happen overnight.

Our belief is that it will take at least 12-18 months before real growth can pick up in this economy and a lot of hard decisions will have to be taken. We will be in a fiscally consolidatory position for the next 12 months to two years and that will be a tough time for businesses and also to some extent for the markets.

Senthil: What is the mood at your Conference because as you said that the Budget is a non-event, you blamed it on us, you said it is a media creation but what is the mood because at the conference you have got a lot of people talking about the political economy; what are people looking for?

Bhatia: We have 500 registrations globally. We would be having 5000 meetings getting conducted over the next three days but more than again the headline hype, the crux of it is the companies are saying we should wait for a new government to take charge. The investors are also saying India is not in the same weak position it was last year though we are now labelled to be the fragile five, at least for now it seems our current account deficit has been brought under control.

However, the role of the new government - the structure, the composition and the leadership are all going to be key. So, it is wait and watch for both corporates’ and for investors.

However, there is a tinge of hope and a feeling that the worst is behind us. I would go out and say that India would do better than most emerging markets because India’s pains and problems what we saw in 2013 are to some extent behind us. So, unless we have a very bad outcome on politics India will fair better than most emerging markets which I think is also the view which most fund managers are taking and that is something which will be corroborated once a new government is in place.

For entire interview watch video