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Mkts likely to stay above recent lows: Kotak Mah Bk
Published on Tue, Jul 08, 2008 at 18:13 , Updated at Wed, Jul 09, 2008 at 10:16
Source : CNBC-TV18
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He feels the Left withdrawing support is not of significance as it makes the government more flexible. "The uncertainty has come off, so the market will now leave politics behind." According to Jayaram, most analysts have not factored in rising bond yields into earnings.
Excerpts from CNBC-TV18’s exclusive interview with C Jayaram: Q: Is politics discounted? Can we forget about it for the next few months or not quite? A: At this point in time, from a market perspective, the Left has pulled out support which is not really of much consequence for a couple of reasons. One with the help of the Samajwadi Party and some of the other parties the Congress will be able to pull through. In a strange way, it actually make this government probably a little more flexible in terms of being able to handle a few economic reforms which they may have wanted to. It’s a moot point whether they will actually go through with it, but at least now they have that sort of flexibility to do these things if they do want to. If anything, the market would perceive it as marginally positive. Q: The other thing the market started talking about is the fact that redemption pressure seems to have eased off. While we may not get large incremental inflows, is that the sense you are getting that the outflow has stopped? A: In many of our funds ‑ both global as well as the local ‑ we haven’t seen much redemption. We clearly haven’t seen too much of fresh inflows either. This has been the pattern for a period of time. After having talked to many of the investors in our funds, they are unlikely to sort of exit at this point of time. In fact, they could sort of add more, if they believe that the worst is over and that the momentum has swung, at least a little bit on the other side.
Q: What is your call on the markets now? Do you think the recent lows will hold out for a moment or do you think there is more pain while the earnings season unfolds this time around? A: As the earnings season unfolds for the first quarter, there is unlikely to be too many surprises. To that extent, I don’t see it as a negative factor for the market at these levels. I would expect the lows that we had touched to hold out for a period of time. The real wild card here is oil. For any structural move to happen in the market one has to get a clear sense on which way it is headed. Currently, it looks as if it is as bad as it was sometime back, but there is really no conviction on that. Unless that settles down at some level, we will not see any clear pattern in the market. Q: What about the longer-term issue of a hardening interest rate scenario? How much pressure do you think that might put on equity markets over the next few months? A: It is an important issue. We have already seen the 10-year bond go up into the 9.1-9.2% range. I don’t think most analysts have actually factored this sort of movement in the 10-year and interest rates into their calculations. Given the current situation, the bias is still northward on interest rates. As that happens, it would start to get factored into most analysts’ expectations and will put downward pressure on equity markets. Q: What is your best guess for the next three months? Do you think we will be grinding in a range or do you see the possibility of a sharp technical rally, if some good news comes in and prompts short covering? A: I can only think of oil coming off pretty sharply as being the sort of good news that can actually trigger a rally. If that were to happen for whatever reasons and if there was broad conviction in the market that oil would trade in a range significantly lower than what it is today, then that could definitely be a reason for a sharp upswing. But besides that, I cannot see any real triggers that can sustainably improve the markets. If that were not to happen, I would expect the market to trade in a range. |
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