Responses given to ADC on Questions relating to Markets.

 What is driving the markets crazy?

There are several factors that are on the minds of traders (investors can ignore many such factors) like the conflict in Yemen, Strong economic data from the US and its resultant impact on emerging markets, the untimely rains and its impact on crops leading to further inflationary trends and its possible impact on the RBI policy with respect to further reducing interest rates. Add to this the volatility in international prices of crude and its impact on the Rupee and the ability of the government to pass contentious legislations successfully.

- With the markets yo-yo-ing 500- 600 points alternatively ...what according to you is the reason for such volatility?

Many times the volatility is witnessed due to technical factors also, which seems to be also contributing to the see saw. Our markets have seen stocks surging, and soon we shall have the result season, where the expectations are that the results of individual companies may not keep pace with the prices already risen, hence that has added to selling pressure. Add to this the expiry of March contracts on the FNO segment. We also have to account for some positions being pared on account of the Financial year end when liquidity is generally tight and the focus is mainly on closing the books. Alternately, factors like expectations of a further rate cut and firming of prices for year end NAV’s try to  tilt the scales on the other side.

- With the weather playing the spoil sport with current crops ...and danger of El Nino looming large .. where do you see the markets six months from now...

Predicting markets is something like predicting the weather.., the kind of weather we have lately had has impacted crops and will lead to a situation where prices go up further. This inflationary impact could have a bearing of further rate cuts unless it is balanced by prices of crude falling. This is in the immediate short term, by second/third week of July we should know the monsoon situation clearly, and that will largely dictate the trend for the market thereon. Although initial assessments are that we may have a near normal monsoon. By September I see the Sensex between 30000-31000.

- At what level do u see the markets by December 2015 

If we get atleast two interest rate cuts by the RBI till December 2015 the markets will be in the range of 32000-33000 during the period Sept- Dec 2015.

- Any suggestion for the small investors  

For the small investors, the best bet is to keep investing small portions of money regularly either directly in select high quality blue chip stocks or go the Mutual Fund route. Either way they should not react adversely to the volatility and be aware that even hard core professionals find it difficult to time markets. It is finally the Rupee cost averaging that will work in their favour.

Interview with Business Standard (Ahmedabad)

Benchmark indices (Sensex and Nifty) are near its all time high of 2008. What factors do you think contributed to the rise of market? Specially when in July – Aug the country was talking about policy paralysis, slowing economy, fiscal deficits and poor monsoon? 

The last time one saw the indices close to current levels was only a couple of years back. The Indian Investor in Capital Markets has had to exhibit great patience. The gloomy scenario that existed in the country looks to be changing, with the government exhibiting some urgency in addressing certain reforms like FDI in retail and increase in price of Petroleum products, to reduce burden of subsidy, Increase in Railway Fares etc. While it can be argued that these measure could give rise to further inflation, no one can dispute that it will they will go some way in addressing the Fiscal deficit situation in the country.Internationally, too, the fiscal cliff was averted. The markets are now looking forward to some stimulus by way of the RBI reducing Interest rates 

What the sectors and companies which has contributed to current rally?

In the current rally the FMCG and Banking stocks have been the favourite of the markets

What do you think liquidity or fundamentals as the key driver for the current rally? 

While the fundamentals of any stock have to also bear out and support, the main driver of this rally has been liquidity. The unabated flows that we have seen through out the last year has contributed to the rally.

Do you think this is the right to time enter the market? Or one should stay invested in the market? Or get out of the market with profit booking seat on sidelines and wait for fall to re enter? 

For Investors who have not invetsed in the markets ever, this is a time to enter the markets by making use of the Rajiv Gandhi Equity Savings Scheme. This will give the first time investor a tax saving on Investments upto Rs50,000/-. For investors who are already invested, they could wait before booking profits,as the outlook for the current year looks promising

Which are stocks/ sectors you would recommend someone to invest in the market? – The shocks which can derail the rally and stimulus that can sustain it. 

As our company policy prohibits  I don't recommend specific individual stocks through the media. But the sectors that the investors should be looking at, currently, are those sectors that have not participated in the rally viz the telecom sector, real estate or mining sector. The union budget is round the corner and the market has pinned its hopes that policy inaction which is preventing these sectors from performing, will be addressed shortly.If  such policy action is missed out in the Budget and the budget turns to be just populist exercise (bearing the elections, next year, in mind) the markets can, once again. begin to stagnate.

What is your expectation of the market by the end 2013? 

Its always unwise to try to predict the markets but I think that the Sensex should be around 21500 by Dec 2013

Retail participation in the current rally specially after 2011 is coming down. Do you think only big boys are getting the benefit of the market? 

There are several factors that have contributed to the retail investor shying away from  the equity markets. The emphasis, in recent times,  has been on real assets like real estate and gold.Because of Securities Transaction Tax we  have seen a flight to speculative and intraday traders to other markets where such a tax is absent. We certainly hope that this anomaly of a tax arbitrage is addressed in the Budget. I disagree that its only the big boys who are getting the benefit, the fact of the matter is that markets do not discriminate and a s an old Dalal Street saying goes "  the tea becomes only as sweet as the sugar you put in it".

Sensex in 2020

Happy New Year!

Just an interesting observation.....
Sensex in 1990 was 1000 points,
a decade later in year 2000 it touched 6000,
at the end of first decade of the new millenium, the Sensex was 20000,
Year 2020 it should be 50000 plus (thats my prediction)