 "Nifty to trade in 7,900 to 8,400 band: K Subramanyam")
Markets seem to be in a correction phase. What trends do you foresee for the markets in the near to medium term?
The markets are in a state of confusion thanks to global events which are glued to the oil price movements. No one had predicted a correction of around 50 per cent in oil prices in a span of few months. This rude shock led to sell-off in equities.
However, we feel this irrational movement of oil should even out in the short term bringing relief to oil producing nations and others as a prolonged downtrend could have serious repercussions on the global economy.
Domestic markets are getting over the euphoria generated by BJP's victory in Lok Sabha elections and have started to react to the ground realities. Nifty may remain in 7,900 to 8,400 band ahead of the Union Budget.
On the policy front, what are your expectations from the Budget as the government seems to have reaffirmed its commitment to the reforms agenda?
During the Budget session, the government should be able to get the legislations replacing the insurance, coal and land acquisition ordinances passed. Some significant announcements should be made in the oil and gas sector which is still awaiting a fresh subsidy sharing formula for the upstream companies.
Broadly, one expects a growth oriented budget boosting consumption and investments on infrastructure with special emphasis on the 100 smart cities plan.
Do you think the changes in the Land Acquisition Act and Mines and Minerals Act, made through ordinances, will boost the markets? Which sectors in particular would be the key beneficiaries of these changes and what implications should it have on the investment strategies in the near to medium term?
The proposed changes in the Land Acquisition Act are expected to expedite acquisition of land. Clearly affordable housing and rural infrastructure would be the biggest beneficiaries and this would have a multiplier effect on ancillary sectors like metals and cement.
Thousands of mining applications are pending with states. The new ordinance which empowers the Centre to decide the rules for auctioning, set and enforce timelines and monitor progress of auctions would definitely speed up the whole process.
On multiple occasions, ECB chief has hinted at a quantitative easing programme for Europe. Would such a measure help neutralise the adverse impacts of a rate hike from US Fed? How do you foresee Indian markets reacting to these actions by global central banks?
Even a rate hike in US is unlikely to have a huge outflow of funds as global investment opportunities seek attractive destinations and in this respect India is in a sweet spot. The nearest competition could come from China which has started showing some sparks of recovery. Most of this investment is for long term which takes into account macro-economic factors of countries.
Global equity markets have been quite volatile lately, particularly due to the sustained fall in global crude oil prices. Should one rejig the portfolio in case of exposure to stocks in the oil and gas sector?
The results of the oil and gas companies, particularly the OMCs which have benefitted from the crude price crash, will be keenly watched. However the fall has been so fast that some element of inventory loss cannot be ruled out which should even out in the following quarters. Any further correction should be a buying opportunity in OMCs. For the upstream companies near term doubt still persists in the absence of any notification from the government about the subsidy sharing formula.
Stocks of state-owned banks are in news on reports of consolidation and reduction of government's stake. What would be your advice to the retail investors in this regard? Would a partial divestment in PSBs by the government lead to re-rating of these stocks?
Irrespective of government’s partial disinvestment of its stake in PSU banks, investors’ decision should depend on the levels of NPAs in individual banks which are difficult to predict. Thus depending on individual bank’s position, some of these stocks could see good re-rating if we have a couple of steady quarters showing signs of NPA bottoming out .Besides many of these stocks offer decent dividend yield which will attract buying interest.