Financial Daily from THE HINDU group of publications
Monday, Mar 13, 2006
Financial Daily from THE HINDU group of publications Monday, Mar 13, 2006 |
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Markets
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Interview This market offers little margin for error
Mr Krishna Kumar Karwa - Director, Emkay Share & Stock Brokers It is fair to expect corrections, they help release fresh investments, feels Mr Krishna Kumar Karwa, Director, Emkay Share & Stock Brokers. "The left-out feeling that many small investors have can lead to irrational decisions," he says. Excerpts: Valuations are high already - will they go any higher, at least in some sectors? Let's just say that the markets are expected to remain buoyant, as liquidity will continue to be strong in the foreseeable future. Relative valuations will rule the roost. The sectors which are expected to do well include engineering, textiles, steel, telecom, FMCG and banking. Besides areas like paper, sugar and commercial vehicles are promising. The markets look fairly valued and offer little margin for error. Return expectations should be realistic and portfolios should be designed accordingly. How will you advise an investor who has gained while the index sailed past 10,000 points? 10,000 is certainly a milestone. An investor, I mean a retail investor, who has benefited should book some profits at this stage and diversify his portfolio with the help of other asset classes. Within equity, he should be invested in companies, which have leadership positions in their respective industries. However, to be euphoric about 10,000 points will be foolish because at the end of the day what matters are the stocks that an investor owns and not the index. Small investors need to be more cautious as their left-out feeling can lead to irrational decisions, resulting in losses. Which factors can really damage the equity market, at least temporarily? Interest rate cycle moving upwards and oil prices shooting beyond $75 are the two main concerns. Political risk always remains. But that is a short-term phenomenon. While we expect GDP growth to be robust, any slippage in these growth rates may figure among the prime reasons for sharp corrections. The stock broking business is changing like never before. What more is expected? Local brokerages are planning to expand their operations to meet the sharp domestic growth and eventual consolidation. Upgrading technology will attract a lot more attention. This will help capture the retail market in the most efficient manner. Upgrading existing branch and franchisee networks will also be important. The broking business has seen smart growth - about 80-100 per cent in the last two years - on the back of the advancing equity market. With the economy expanding, it will develop even more sharply. Foreign brokers are eyeing the fast-growing market as well. Branding will become key to sustainable growth, while MF distribution, PMS, insurance and commodities broking will assume greater significance. What are Emkay's own proposals? We have firmed up plans to spend about Rs 25 crore over the next two years to increase our institutional businesses and systems. The company currently has 60 branches. This is scheduled to go up to 100 by the end of 2007.
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