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Sharvari Patwa

Mumbai, Oct. 24 The stock market witnessed the worst-ever fall on Friday with the benchmark Sensex losing more than 10 per cent. Business Line spoke to Mr Raamdeo Agrawal, Managing Director, Motilal Oswal Securities, on what triggered the fall and where the market is heading for.

What was the trigger for the market fall today?

One is the global situation. With most Asian markets, especially the Nikkei, at very low levels, the confidence levels in domestic market were lacking. Secondly, the market was hopeful as the credit policy was on the way. But that was more of a disappointment. All these did not provide for a good backdrop.

What is the most immediate problem in the market currently?

It is not a liquidity problem currently but the cost of liquidity, which seems to be the core problem in the market.

Do you think the market has bottomed out at this level?

The force of fall today was very high, and there was panic all around. But still, until the US market bottoms out, Indian markets will not see much stabilisation, as we are globally linked to everybody. In fact, foreign institutional investors level out the market as they withdraw money where the PE levels are higher and balance the markets.

What is your advice to retail investors?

What I am doing is trying not to panic, and since I have not leveraged much, I would much rather prefer to buy specific stocks of non-cyclical business, such as consumer products and services.

What is the situation in brokerage houses now?

For a local brokerage house the value of business has definitely come down. Things are no more rosy. This is the most challenging time for them. Also, with falling volumes and values falling in brokerage business, the cost structure has been highly affected.

Who would be most affected players?

While the financial sector is mainly in good shape, it is those who have done irrational lending who might be in trouble. Anybody who has leveraged has to be cautious, as all the trouble is coming from the excessive leveraging. The irrational allocation from the excessive leverage is the source of trouble.

What do you think of the mutual funds scenario in these times?

The safest vehicle right now is mutual funds. Instead of doing individual punting, investors should put their money in mutual funds. In the past 5 to 6 years, the mutual fund industry has become very large and will steadily continue to grow.

What sort of policy action do you think is called for at this point of time?

The effort should be to make equity investments more attractive. This could be brought about by either bringing down dividend taxes or completely abolishing them, at least for a couple of years.

If the Government makes dividend payment more attractive, the pay-outs of corporates will increase. This would put more money into the hands of investors to invest in equity markets.

More Stories on : Interview | Financial Services | Mutual Funds | Stock Markets

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