New Delhi: With fears of the world heading towards another financial crisis written all over global markets, the Indian market is not likely to be any safe from the carnage. However, in an interview with CNBC-TV18, portfolio manager, PN Vijay says that Friday maybe the 'last tough day' for investors. "I see some resolution, going forward from Friday’s mayhem," he says.
Vijay further says that right now no one is taking note to the strong fundamentals of a strong domestic consumption. He sees no impact on India’s macro aspects, compared to other emerging markets like Korea or Taiwan, as we are not dependent on Europe and US demand
Below is an edited transcript of PN Vijay’s interview with CNBC-TV18.
Q: Where do you think India may be pitted after the events of Thursday night?
A: Thursday night was scary. There has been a huge sell-off in the US and there is a lot of talk about double dip. One does not really know how deep a cut it is, how much is the fear coming with the job data. The impact on India, on a macro basis is limited as compared to other emerging markets like Korea or Taiwan because we are not dependent on demand in the Europe and US.
We have the domestic consumption story going for us and if crude much below $ 90, it would be the silver lining on inflation, sooner than later. However, right now nobody is really listening to those fundamental voices. People are surely in a state of panic so we have to see where it goes.
On Thursday, we saw some semblance of a panic bottom in the way ITC and other stocks cracked and it meant that people were just selling shares like commodities. We need some calm in global markets before we could go back to Indian macros. Friday maybe the last tough day for investors, I see some resolution, going forward.
Q: There is some fear about where the rate sensitives may go, especially given the fact that they have been under pressure anyway? How would you approach the banks first?
A: You have to approach banks in two ways, immediate because most of the banks are also heavily traded and fairly active with bears and retail sellers. Hence, there would be continued panic sell off in private banks, probably because there is lot of profit off the table to be taken. PSU banks are fairly sitting ducks, so next one or two month’s one is not going out with a great optimism on the banks. However, come October there would be a clear signal from the Reserve Bank on the interest rates and probably have a downward bias. It can be a great time for banks because of the NIMs.
Hence, at that time, banks would be a great hunting ground. One need not be in a great hurry. As far as autos are concerned after the last July monthly figure, it is a good time to get into auto blue chips.
Around the festival season, demand picks up from September and hence, if one wanted to bottom fish today, probably the autos would be a better bet.
Q: How much of a role do you think will New Delhi play over the next few days in the midst of this global volatility?
A: In Parliament, it was interesting that the main opposition party is back with a bang and we saw one of the best discussions seen in long time. Some very important points were made by Yashwant Shina and rebutted by Pranab Mukherjee and it shows that there is a great inclination among our parliamentarians to work together.
The six or seven economic legislations, the Companies Act, pension, banking, the probably change in the insurance is difficult to would pass through smoothly due to the kind of political consensus between Congress and main opposition party. It would be great for the market if these resolutions pass, since they badly looks for some positivism from New Delhi.
The multi brand retail is a very motive issue. Congress and Rahul Gandhi seem to be pushing it rather amorously and if it happens it will be a very big kick to see Walmart in India. These are some very big positives. Of course, the 2G scam and Anna Hazare’s fast are all there but on the other side, if we have consensus on major economic issues in New Delhi it could bring a positive impact on Dalal Street.
Q: Of these two globally exposed sectors - IT and metals, which one would you consider buying now or would you stay away from both these sectors?
A: I will stay away from metals because in the global meltdown, the commodities sold-off more than the equities. Base metals and oil are on a downward spiral as well. Metals for us have been a no-go for the last three to four months.
If you see the US, PMI for US slumped from 53 to 51 but the IT companies and the verticals to which the Indian companies supply are still very robust. The last quarter earnings have not been bad there. Hence, the question is the type of capital expenditure and the type of margin erosion that may happen going forward. Therefore, I am not saying go out and buy TCS and Infosys but one can stay invested in the IT sector.
Q: Which of these heavy weights do you think may come under pressure if the market has to lose 100-150 points?
A: Bharti may come under pressure because BHEL and L&T have already corrected substantially. BHEL and L&T are also cash rich and don’t have debt issues that may perk-up from the fallen down levels. For Bharti, things have stabilized but Africa is still a big concern. Among these three stocks, Bharti looks the weakest and may trend down even if the market recovers.
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