Economic Times (ET NOW) TV Channel 29 Jan 2010

India was the worst performing market in the region today. What were the factors according to you that led to this kind of give this kind of performance? 

One-day underperformance or the last few days obviously disappointing but I think what investors and traders got from there was that above 5200 markets were looking tired. I think most people - if they are honest and fair - would have expected some sort of fall may be 200-300 points in Nifty. It was always on the cards the way midcaps and frontline stocks had been moving up. 

Yes, the 500 point fallen in matter of four-five days is unnerving, it is nasty, it is very painful and traders or investors who trade without stop losses and discipline would have been badly burnt. Today probably a good opportunity for the markets to bounce back but you seen a lot of selling pressure again coming in at higher levels whenever the markets try to bounce back in today. It suggests that a lot of people are still very nervous. They are looking to sell on every rally, they are looking either to add to the short positions but the trend is clearly on the downside for Nifty traders today.

But fundamentally what has changed over the last few days – not an awful lot. Lot of frontline stocks, which are overvalued, have come down on valuations, midcaps which will good a few weeks ago still a reasonably good stocks and the valuations there also much more attractive. The CRR hike tomorrow probably factor into some degree. 

In the short term nothing changes. In the immediate short term what changes is perhaps the sentiment. In your assessment has the sentiment changed? 

But the realty is the buying which comes in from retail investors does slowdown when the markets fall. They believe that okay at 4900 may be tomorrow 4800 so they defer their buying decisions. So any selling which you are seeing at the moment is either people who are stuck may want to just book whatever profits they left on any rally. People feel they have lost extra amount let us wait to see what happens tomorrow and then you have got the budget to look forward to over the next few weeks. 

But yes it has clearly changed on from buy on dips to sell on rises but sentiment can change very fast. If there is a very nice stance by the RBI tomorrow, you could see an equally sharp pullback over next few days

We feel that it has got no choice but to tighten up now. CRR hike of 50 basis points probably is a decent compromise. The more optimistic would say 25 basis points but at some stage the RBI have to tighten the liquidity. The measures that they gave in a stimulus at some stage are going to be withdrawn. Timing obviously from a market perspective is probably a bit negative because you are on a downtick with a negative sentiment. So anything above 50 basis points on the CRR would be taken I think very negatively and you would probably see a further kneejerk reaction downwards. Anything better from that I think the markets will probably taken a stride. 

What do you think to what extent, do you feel we are vulnerable to breaking that 4500 mark on the Nifty? 
Such a level is a long way off. The levels talked about as if it has no significance for the people who are invested at the moment but it is almost 10% cut from here and that would also hit to traders and investors very hard. I think most people may give the Nifty 100 points more on the downside before they decide well that’s enough from the long positions. 

From an investor’s perspective, I think they would probably be quite happy if the markets fell to that sort of level. There is still a lot of liquidity around India still a very good growth story, FIIs remain bullish on India despite the concerns of liquidity tightening globally and they would use any such fall as probably a decent opportunity to buy and at a much more attractive valuation. 

But talking about levels of 4500 or 5500, I think those things are not the best way for an average trader to play the markets. You cannot have conviction rigid with any particular level. Markets very change very fast and you see clearly over the last few days some buying on dips everyone is talking about selling the rallies. It again can change very quickly. So for us 4500 would be a pretty disastrous situation but considering the sort of damage that would create to stock prices especially in the midcaps sectors as a whole. 

Are you looking at that particular stock and any outlook on that IPO? 

Not particularly on this one. IPOs generally have not performed that well. Yes Godrej had a good opening, Cox & Kings another IPO did well but generally they have not performed well. I think up till last few days obviously there has been plenty of opportunity in the secondary market for most investors. I think the government disinvestment process will really ignite the retail participation but individual issues. If they get good backing they are likely to perform reasonably well. 

But on the real estate as a whole, I think sticking with tried and tested companies which are already listed

Are you actually perhaps thinking DLF as a good value at buy at this point of time ?

DLF, HDIL companies, sticking to a company which has already shown a proven track record and had a few years of listing I think that’s probably a safe away for investors at the moment. Well it is not a cheap stock but if your call is on real estate then you going to have to take some exposure to some of the large caps and DLF is obviously one of the biggest company. The stock has been battered, it’s a high beta sector, traders love to short real estate stocks across the board when things get bad and equally the stocks tend to move up 5%-10% very swiftly when things are going well in the markets. 

The hike in interest rates is real fair for these companies. But I think the ground level realty is much better than it was six months to one year back and the NCR prices are definitely firming up companies like DLF, Unitech will definitely benefit by that. The credit crunch, the liquidity problems these companies had to a large extent is over. They are sorting up their balance sheets so there is a lot of negativity factored in, the market as a whole is not convinced. But for us is a sector that we would like to accumulate on any significant decline even at the current prices. 

Let’s get your top idea for 2010 and it has to be a midcap not a large cap. 

I would look at shipping stocks. They have had a very good blow up, they have all corrected and stocks like Bharti Shipyard, GE Shipping from a valuation basis reasonable, they are attractive. I think the downside more importantly is cap. So as an investor you can probably comfortably buy knowing that even if the markets tanked over the next few days is likely to be outperformers. 

If you actually really believe the growth story of India and that the global economy is generally coming out of recession, it is a sector which has been battered badly over the last couple of years and things can get better. So stocks in the shipping sector seem good. In the PSU or private banking, Yes Bank again it had may be some disappointing results but again a very aggressive bank and when the banking sector as a whole have its up move again this stock we think will perform well over the year.