Nilesh Shah and Santosh Kamat weighed in on whether the RBI and SEBI statements will calm markets.
The Reserve Bank of India on September 23 said it was closely monitoring the financial market along with the Securities Exchange Board of India (SEBI).
The statement came after the Indian stocks turned volatile on September 21, primarily dragged by NBFCs and housing finance companies on reports the firms were facing a liquidity crunch.
"The Reserve Bank of India and the Securities and Exchange Board of India are closely monitoring recent developments in financial markets and are ready to take appropriate actions, if necessary," the central bank said in a statement.
Will this statement help calm frayed nerves and stem the redemption pressure in debt funds is the big question?
Here's what the experts said:
According to Nilesh Shah, Managing Director of Kotak Mahindra AMC, statements from RBI and SEBI are very important especially when there is a deficiency in the system. "For the time being statements by the RBI, SEBI will be able to cool off the markets," said Shah.
"Right now MFs have enough liquidity but it is extremely important that we take precautionary measures," added Shah.
Santosh Kamath, CIO-fixed income, Franklin Templeton, said if the market believes the government will take measures to provide liquidity if and when required to MFs, then there won’t be any need to do something.
A well-managed NBFC on the risk side is better than a well-managed manufacturing company, according to Kamath, contrary to what most people believe.
When asked if any fixed income investor will refinance an NBFC, Kamath said, “If he has seen 2008-2009 when the entire world was collapsing, NBFCs came back very strongly, so why will not come back this time."When asked if the market is looking attractive at current levels, Shah said it is becoming attractive but over the next 10 months there will be enough bouts of volatility. "So do not put all the money just because the market has fallen," he said.