S Naren, CIO-Equities, ICICI Prudential AMC is bullish on Indian equities and says any dips could pose as a good buying opportunities for all those who are under invested in equities.According to him any fall in global markets have been an opportunity to buy India and currently too such an opportunity has come about The market is now presenting an opportunity to invest for the long-term in sectors like IT, metals, banks, telecom etc, says Naren in an interview to CNBC-TV18In an interview to CNBC-TV18, commenting on the fall in crude prices he says that India will benefit from the fall in crude prices the story will take time to play out, so one will get buying opportunities to buy not only today but also in the coming six-nine monthsMeanwhile, the Indian rupee too according to him has been the most well behaved currencies against the dollar in last three months.
Below is the transcript of S Naren’s interview with CNBC-TV18's Anuj Singhal and Sonia Shenoy.Sonia: Things have gotten slightly tricky in the last couple of weeks, do you think it is just the year end phenomenon that people would rather take their profits home than worry what happens on their vacation or do you think that the trend of the market has started to turn a bit now?A: First of all it has nothing to do with India. India is one of the biggest gainers in this entire crude oil move. The gain is like Rs 25,000 crore a month because of this fall in crude oil. The problem is that while India gains Rs 25,000 crore a month it comes out of some other person or some other countries.
One of the countries which has certainly got hurt and must have lost at current crude oil the losses are pretty significant is Russia and there the interest rates went up and consequent to that we have had this sell off and when India gains Rs 25,000 crore a month there is a counter party and those counter party losers are the reason for this rally. Thanks to the efforts of Reserve Bank of India (RBI) we have such a huge increase in Foreign Exchange (Forex) reserves at this point of time that Indian rupee is one of the most well behaved currencies against the dollar in the last one to three months.So India is suffering some collateral damage. We have seen falls due to Dubai, due to Ireland, Italy, Spain, Greece and we have seen that all these falls due to global reasons have all been opportunities to put money in Indian equities and again you have one such opportunity and the disadvantage this year is normally we have these panics between May and August each year if you have seen the past. This year the panic didn’t happen in May and August mainly because the election actually helped India to be the best performing country in the world in the markets and this time the panic has come in December unlike in May to August period.Anuj: From long term investors point of view what kind of sectors have now presented buying opportunity because we have IT correct quite a bit, we had metals correct significantly and off late we had financials also correct?A: Actually the market itself has represented an opportunity that includes IT, metals, banks telecom. So, broadly the entire market has presented opportunity and such opportunities come normally always in a year and that is the beauty of market and if you are able to capitalise on those opportunities it will be very good.If you take the very near term what happens is when an important commodity like crude oil cracks from USD 110/barrel to USD 60/barrel what happens is there are inventory losses and some of those inventory losses will show up in the results for December when they show up in different companies.
There is no logic to giving a multiple to those losses because these losses are strictly one time and that definitely does hurt shorter term earnings and in my opinion people should invest for the long term now but they should not be surprised if the earnings surprise on the downside in Jan-Feb because such a big inventory drop and this has happened in iron ore, cotton, crude oil obviously is going to lead to a situation where at least few companies are going to have huge inventory losses and that should not be worrying.So, that is why this is a beautiful opportunity for investing in the long term. One should make use of this opportunity and you might get such opportunities over the course of the next six months maybe because of the fact that such a big drop in crude oil is going to affect lot of economies on the negative. India will get affected in the positive but that will take time to play out. So, you are going to get a beautiful buying opportunity today and over the next six to nine months and investors are sufficiently under invested in equity in India that this nine month window is a beautiful opportunity to again increase their weightages.
Sonia: If I just slice through sectors, take the four heavyweights from different sectors Reliance Industries, Infosys, Larsen and Toubro (L&T) Bharti Airtel across the board these stocks have fallen 10 percent this month itself. Are you suggesting that you should just go out there and buy good quality names across sectors or is it case by case now? A: As we will always tell you pick good funds belonging to our stable to consider investing rather than individual stocks but otherwise I would say there has been a good correction in many good fundamental stocks. Many of them have become much more attractive then they were a month or two back and these are all interesting opportunities. As I said you have to invest with a longer term view, if you are going to be a trader every day you will be watching Russian rouble just like we used to watch euro in 2012. However, mutual funds are vehicles for investment and for us it is a beautiful opportunity to look at investing with a long-term view because they are not focused on what happens to rouble in the next three hours or what happens tomorrow. I think these are difficult times for traders and very good times for long-term investors. Anuj: One sector which is clearly under pressure is the oil and gas sector and it is a bit of a double whammy because a) what is happening to crude, you don’t know how that dynamic is going to shape out and b) you don’t know yet what the government policy is going to be because oil marketing companies (OMCs) are not being given advantage of falling prices in terms of any kind of big positive margins and on the upstream side we don’t know how much of subsidy burden they will have to share. So, seems quite a bit of correction in stocks across the oil and gas space. Would you be investor here or would you rather stay out?A: We would but the only point as I mentioned if you see where the inventory losses are going to get concentrated is going to be in this sector. So, one should invest but keep in mind that you have to invest for the long-term. I think if crude is going to sustain at one level it is much easier for the government to come up with policy. We were very pleasantly surprised by the increase in excise duties on both petrol and diesel. I think they were very necessary because end of the day if the fiscal deficit has to improve and when crude oil comes you have to increase these excise duties so that the excise duty collection improves. So, overall the policy is under formulation and would anyone have judged that in the last one week this kind of fall will happen and we will be worried about crude going down in the world rather than crude going up. So, I think easy to formulate policies in this kind of volatile market. On the whole if you see over a period of time India will be the biggest gainer of this crude oil reset and we will get that benefit in the long run. If people expect you will get that benefit in the next one or two months they may get disappointed but for long-term investors this is a beautiful opportunity.Anuj: Currency has again come back to haunt a lot of investors. The way rupee has fallen it was resilient in the first half of dollar strength but now it has quite clearly become a bit wobbly. Do you think that is an area of concern or is that something that you should just take in your stride and move on?A: When people ask me what is the problem I tell them dollar is the greatest currency in the world today but Indian rupee is a great currency. If you compare Indian rupee against yen, Brazilian real, Indonesian rupiah, Russian rouble you will find that India has a great currency. It is just that US dollar is the greatest currency. So you are comparing a great currency against the greatest currency and the level of reserves that today the reserve bank has makes our job very easy compared to most of the countries in the world.
So, currency is not a problem but you have to recognise that dollar is the greatest currency at this point of time. So that is there but currency is hardly a big problem at this point of time.The only issue in my opinion from an equity market point of view is that growth has not picked up and it doesn’t look with this kind of fall in commodity prices that growth can pick up in the near term. I am not worried about currency; I am not worried about volatility in the equity market. I do believe that this kind of a trend in global commodity prices mean that our recovery can get delayed a bit but again that doesn’t affect long term investor, it only affects the trader.
So, from an investor point of view it is a very good period, from a trader point of view people have to look very closely at all the data because it is not an easy period for a trader but a very good period for long term investors.
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