With heavy selling by FIIs hurting market sentiments, Rajesh Jain, EVP and head, retail research, Religare Securities tells Puneet Wadhwa about the future prospects and the investment strategies. Edited excerpts:
The November 2011 series has been quite bad, with markets witnessing increased volatility and downside. How do you see these panning out in December?
The Indian markets are trading with a negative bias on account of global cues. The Nifty hit a 23-month low recently. The 4,600 level is a major support for the index. Below this, we might see more selling. The index has some support at 4,600/4,530 but will face resistance at 4,750/4,850.
What theme are you following while investing in markets? What are you advising your clients?
We advise to buy defensive stocks in the current market conditions. One can accumulate gradually and average out at lower levels if the markets slip.
Are there any stocks/sectors that still offer opportunity among the frontline stocks from a medium-term perspective?
Cipla and Hindustan Lever look good from a medium-term perspective.
What’s your view on foreign institutional investor (FII) flow for the remaining part of the current financial year and in FY13?
Heavy selling by foreign funds has hurt the sentiment adversely. The FIIs, who had poured funds into the domestic markets all through 2010, have turned bearish on the Indian markets from a short-term perspective. While their positive long-term view remains intact, their chief concern is that the domestic stock markets were running into macro-economic headwinds and looked over-valued in comparison to other markets. The main bugbear is inflation.
Are you concerned about the recent statements by the government regarding rupee depreciation? How do you see the rupee and crude oil panning out in the near term?
RBI’s intervention can cap the rupee depreciation only to a certain extent, given the global macroeconomic uncertainty and the safe haven demand flowing in the greenback. Traders are moving towards currencies to hedge losses in equity markets, which is strongly supporting the upside for the pair. Technically, the USD-INR pair is in the middle of the bull-run and we can expect the pair to surge northwards towards the next target range of 53.50. However, we can’t rule out a small dip in the near term before moving into next trajectory of gains. Crude oil is expected to trade near $100/bbl in near term given the new sanctions imposed on Iran by the Western countries and the ongoing Arab unrest. Moreover, Opec is expected to cut its output in its next meeting scheduled in the first week of December.