 "Markets can bottom out in 48 hrs if elections announced: Ramesh Damani")
The recent mayhem in markets has spooked many fresh questions about the selling pressure and stability in the near term. Even the most sought after companies or defensives have now started to crack leaving very less options for the investors to hide.
Jitendra Kumar Gupta spoke with Ramesh Damani, who is member BSE to understand his views on the recent correction in the markets and seek his advise for the investors.
What do you attribute this carnage to, is it just a fear or there is more to do with fundamentals?
This will obviously blow up the fiscal deficit and put pressure on the government's finances. In my opinion recent measures are not well thought off. These things are not going to help them. Instead of taking key decisions on the major issues, which could have positive impact on the economy and the sentiments, the government is actually adding fuel to the fire.
But is not it too late for the FIIs to sell India?
FIIs were the only buyers in the Indian equities over the last few years so. I do not have the exact numbers, but there are so many FIIs who are selling into the Indian equity markets. If they believe that rupee is still going to fall and share prices have more room for the correction, how long they can wait in the sidelines and take the entire pain.
If they do nothing they will loose huge sum of money they have invested over the last few years. Under this situation one thing I can tell you is that the most vulnerable companies are the ones which have large FIIs holding.
Do you think there is more pain and how long this could sustain from these levels?
I do not want to predict if there is more pain. As long as the rupee remains weak or if it keeps on falling everyday the markets will remain under tremendous pressure. If the rupee does not stablize markets will not stablize.
In this background I would possibly think that the banks are more vulnerable. At this point in time I would really avoid banking stock and the companies where the FIIs have large holdings.
Where do you think investors can hide?
The only way to hide is in the US dollar. We probably do not have that option. I do not know there is no easy answer to your question. We at this point in time have very less options to hide. Be it fixed income, gold and real estate, equity we do not have much choice at this point in time.
Even at these prices do not you think there is value in equity?
May be one can buy mid cap stock which did not fall so much and seems to have bottomed out. One can probably also look for the companies which are exposed to the dollar earnings or only exposed to the rupee earnings.
These companies should be less affected because of the falling rupee. May be sectors like technology, media and pharma could be the few better options to invest and find good ideas.
What are the key risks in your mind at these levels?
At this point in time the biggest risk to the markets is the falling rupee followed by the risk of current account deficit and fiscal deficit. It seems that the government is serious but it is not taking enough measures to restore the confidence.
Rupee is definitely the number one risk for the markets to stablise from the current levels. But I think if the government announces elections the markets can bottom out within 48 hours.
Jitendra Kumar Gupta spoke with Ramesh Damani, who is member BSE to understand his views on the recent correction in the markets and seek his advise for the investors.
What do you attribute this carnage to, is it just a fear or there is more to do with fundamentals?
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Markets are weak because there is a fear about the fiscal indiscipline. Markets were already weak. The falling rupee, fear of current and fiscal account deficit has impacted sentiments at a time when confidence was low. On top of that the government has announced the Food Security bill, which could cost the nation about Rs 1,25,000 crore.
This will obviously blow up the fiscal deficit and put pressure on the government's finances. In my opinion recent measures are not well thought off. These things are not going to help them. Instead of taking key decisions on the major issues, which could have positive impact on the economy and the sentiments, the government is actually adding fuel to the fire.
But is not it too late for the FIIs to sell India?
FIIs were the only buyers in the Indian equities over the last few years so. I do not have the exact numbers, but there are so many FIIs who are selling into the Indian equity markets. If they believe that rupee is still going to fall and share prices have more room for the correction, how long they can wait in the sidelines and take the entire pain.
If they do nothing they will loose huge sum of money they have invested over the last few years. Under this situation one thing I can tell you is that the most vulnerable companies are the ones which have large FIIs holding.
Do you think there is more pain and how long this could sustain from these levels?
I do not want to predict if there is more pain. As long as the rupee remains weak or if it keeps on falling everyday the markets will remain under tremendous pressure. If the rupee does not stablize markets will not stablize.
In this background I would possibly think that the banks are more vulnerable. At this point in time I would really avoid banking stock and the companies where the FIIs have large holdings.
Where do you think investors can hide?
The only way to hide is in the US dollar. We probably do not have that option. I do not know there is no easy answer to your question. We at this point in time have very less options to hide. Be it fixed income, gold and real estate, equity we do not have much choice at this point in time.
Even at these prices do not you think there is value in equity?
May be one can buy mid cap stock which did not fall so much and seems to have bottomed out. One can probably also look for the companies which are exposed to the dollar earnings or only exposed to the rupee earnings.
These companies should be less affected because of the falling rupee. May be sectors like technology, media and pharma could be the few better options to invest and find good ideas.
What are the key risks in your mind at these levels?
At this point in time the biggest risk to the markets is the falling rupee followed by the risk of current account deficit and fiscal deficit. It seems that the government is serious but it is not taking enough measures to restore the confidence.
Rupee is definitely the number one risk for the markets to stablise from the current levels. But I think if the government announces elections the markets can bottom out within 48 hours.