Focus on earnings, inflation now: PN Vijay

A: I expect a decent rally from here because of the twin factors of the UPA winning the trust vote and oil decisively falling. So over the next one week one can expect an upside of anything upto 5%. Now investing at 3,700 and getting out at 4,500 is a easy meet, the big question is what happens after that and that would depend on corporate performance to what extent the inflation has affected corporate performance and of course the price of commodity, whether the commodities are really vaining the world over.

Things should progressively get better. Historically India has had a good second half of a calendar year most of the time and with monsoon being pretty okay except in the West, where you are having an oil shortage. We should be pulling through and we are instep for a decent type of market for the next few months.

A: The banking reforms are quite complicated, in that they relate to capital adequacy and the areas in which banks can operate. So the banking reforms would not materially affect the fortunes of the banking sector in the short-term.

If we take a model that we may not have a higher interest rates in the coming half-year then banks which have been beaten out of shape, could recover. The private sector banks have taken it on the sheen and the ICICI Bank, HDFC Bank and these may lead the next rally in banks.

A: We should get the pension fund, pension reforms through because we are almost at the last mile there and authority was appointed a couple of years ago, the managers for the pension funds have been appointed and it’s a huge ocean of equity investment of 5-10 years that’s available of the tap. That could be a big trigger for the market. On the downside it’s inflation, we are getting some sort of a decent pull down on oil but nobody really knows how long it will last. If oil tends to move up again then we will have the whole chorus starting and this rally may just peter off.

A: I don’t think so. Right now what we are doing is we went quite a lot into cash and we are reinvesting based on the quarterly results because the big question mark about the companies also has been that this high interest rates, high inflation last quarter how has it actually affected EBITDAs and PATs. So we are deploying cash and we will continue to deploy cash after the trust vote and we will get back to 4-5% of cash that we normally keep.

Q: If the policy is quite bearish in its tone but there is some headway on banking reforms act. Do you think one will mitigate the other or if reforms are clear that is going to be a thumps up for the banking space no matter, where rates might be inching?