The Hindu Business Line : `We do not expect any crash/panic situation in near term'

Investors are increasingly allocating more to equities as they realise that the potential upside here is greater than in anywhere else, feels Mr Avinash Gorakshakar, Head, Private Client Group, Emkay Share & Stock Brokers.

PCG clients are also looking for value-added services, he adds.

Excerpts:

The equity market is showing few signs of reversing despite a few hiccups. How do you read the situation?

Yes, stocks are showing a volatile trend of late. But the long term trend definitely continues to remain positive. This is because corporate results in the second quarter of 2007 have turned out well, while oil prices have come off from earlier peaks. Also, the Fed is unlikely to raise interest rates in the short term.

More importantly, FIIs have now started looking at India as more of a stable market within the emerging markets universe whereas section of large- and mid-cap stocks look attractive from a 2-3 years perspective. We think the market will consolidate at these levels. While corrections are bound to happen, we do not expect any crash or panic situation in the near term.

However, it must be remembered that any major meltdown in the overseas markets could be the major reason for the trend to change in the short term in India.

Are investors getting far too focused on equities, with little regard for other asset classes?

Equity as an asset class has surpassed other classes of assets in terms of performance over a longer period of time.

With investors getting a wide choice - they can invest in a whole range of large- and mid-cap stocks - we feel that their focus on equities will improve further. They know that the potential upside is far more attractive here than in anywhere else. Let me add here that a few simple but important aspects must be kept in mind before any stocks are recommended.

According to us, the three most critical variables for a company are: the right entry level price for the stock, the management quality and the business in which it operates. If you strictly follow these principles, and with conviction, you may well stand a higher chance.

How is the PCG segment shaping up for Emkay?

Our PCG clients can now be easily divided into two broad categories. There is the trader, who trades daily or leverages his position. There is also the pure investor. Here, I will take you to the May 2006 crash, after which PCG traders had a very difficult time in trying to come back. There were lower daily volumes and lower open interests. As for PCG investors, they have typically tended to invest in mid-cap and small-cap stocks. These, as you are aware, have under-performed in this current rally. Such investors have been gradually balancing their portfolios and are broadly better off. They have become quite mature and sophisticated.

Any new trends here?

PCG investors have started trusting professional advisors like portfolio managers. Mind you, we have not seen any substantial withdrawals even when the markets have corrected sharply. This means, clients have broadly understood the India growth story.

Investors have started trying structured products, including capital protected portfolios. They are also seeking value added services. It is widely believed that a phenomenal opportunity will arise in terms of tapping HNIs in smaller towns.

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