Mkt to be driven by earnings in Jan, early Feb: Pramerica

Below is the verbatim transcript of BP Singh's interview on CNBC-TV18

Q: What are your key takeaways from the Finance Minister interview?

A: The interesting point and we have been suspecting it for some time is the fact that it is going to be very difficult for a government - when it is facing election in five months - to continue to increase prices particularly at a time when inflation is so high. And to take into note at this point in time when most of the parties that are competing with them are actually offering so much of sops like what we are seeing in the case of Delhi election. So it may not be easy for the government to keep on increasing prices from here on and that is something which will probably have an effect on the market. At this point in time I don't think the market is actually discounting that so there will be a little bit of negative surprise in the market going forward.

Q: The exact statement he said is, ‘I cannot speak for the future but the diesel price hike of 50 paisa was a good policy, as well some CMs have asked that the LPG cap be raised to 12’. Just for these you think oil stocks could be a little under the weather today?

A: You should also take into note that oil prices have gone up, Brent is now going to USD 112 per barrel. Infact since the election took place on December 4, as of today oil prices are up roughly about USD 8-10. So global factors have changed since then and so obviously the market is not at all prepared for that at this point in time.

Q: What about the market momentum itself, at 6300 onNifty it has been a steady run that we have seen up until now but facing a bit of a hurdle at that all time high, how do you see the markets move in the first part of 2014?

A: I will actually divide the next year into three parts, first the initial one month followed by pre-election and then post election. Now see post December 8 when the election results came out and market made a new high, if you compare from that day to today lot many changes have taken place, the US bond yields have now crossed 3 percent, the crude oil is back to levels of around USD 112 on the Brent and there are various other developments like the global currencies have weakened. Now if you compare the rupee vis-à-vis other currencies, it has actually appreciated. So the positive side of that has actually slightly got affected.

January is going to be the month of results and the market will be mainly driven by what is reported. We will have result for October-December period. These are the months when we had rupee at 62-63/USD levels, we had high inflation and high interest rates. So you will see the companies that are export oriented or companies with dollar revenues reporting a very good performance. Contrary to that you will notice the other companies actually will be reporting disappointing numbers. So January and to some extent the first half of February will probably be driven more by the results.

Post that we will get into the pre-election rally and any country across the world you will find that when elections take place market actually starts assuming the best possible scenario so usually there is a pre-election rally. So I think post February we will start getting into the pre-election rally, which is how the first half of 2014 will be actually determined.