The Hindu Business Line : ‘Market surviving on day-to-day cues’

“In the last three-four years, this Government hasn’t done much in terms of reforms and I see a complete non-existence of reform process in next year’s Budget...”

Mr Anil Singhvi, Partner at Notz Stucki, feels Indian markets do not appear to be tracking the fundamentals, reason why he also believes that it may be a day trader’s market. He also opines that it may be time to take stock of the rupee’s performance against other currencies and not just the dollar. Excerpts from the interview:

We are back within 5-6 per cent of the all-time high. What’s your sense of the market?

I think the markets are now surviving on day-to-day cues from global events. So I don’t think Indian markets are really tracking Indian fundamentals; they are largely looking at global cues.

But, this is perhaps the last leg of the bull run, for the simple reason that I am seeing penny stocks going up on daily basis. If some stock comes into the F&O segment and goes by 20 per cent circuit, it is clearly a players’ market as fundamentally nothing changes in the stock. So, I think it’s a day traders’ market rather than fundamental stock pickers’.

What do you do as an investor?

We are a long-term player and so we don’t have hedging or derivatives available. I do not also participate in that view. So, we are looking at wherever pocket of value is available to us. We remain invested for three-five years, therefore, daily indices don’t matter much and does not excite us.

The challenge today is to find some good growth story for three-five years and remain invested in that.

What do you think will happen over the next few weeks if the rate cut does come in from the Fed?

I think it will be a reversal of what happened in September. After the cut, the rally came in and this time the rally is before the cut. So I suppose, the 25 bps cut that the market is expecting may be there.

It will be more or less on predicted lines and should Fed decide not to cut it, we may see a bit of profit-taking and bit of a problem later because soon after that we are going for a vacation, where there will not be much of buying or selling.

December 11 is going to be a crucial date from the point of view of day-to-day trading, but long on funds like us don’t even track these kind of events.

What are your key concerns on the market aside of valuations?

I think somewhere we seem to be burying the whole political scenario that is unfolding. This may not be the right thing to do. My personal fear is that 2008 is going to be a very uncertain year, globally too; the US will go through elections, there will be a slowdown of US economy, which will have its own impact on Indian economy as well. Second issue, we may see populist measures than economic measures coming up in the next year’s Budget.

In any case, in the last three-four years, this Government hasn’t done much in terms of reforms and I see a complete non-existence of reform process in next year’s Budget. These are the cues, which are going to be disturbing in terms of how the Indian growth story will pan out.

Do you expect to see any more capital control measures and how would you approach the rupee sensitive segments now?

I think the rupee is finding its own level but let’s not get too obsessed with the rupee-dollar, because globally, dollar is becoming a weak currency. Hence, to just look at the rupee-dollar parity and say that rupee is strengthening may not be a right idea. Look at other currencies and how rupee equates there. This will perhaps give a clue that rupee is not appreciating the way people are making it out to be. So, I don’t think we need any more capital control, if that is the question.

As an economy today, we don’t need any sort of control. What we perhaps need is an opening of the economy further. We haven’t done this in the last three-four years, say in pension, insurance — decisions are pending. We need to take some bolder steps and bring in the next level of reforms in place for us to see the growth of 9 per cent.

You think it’s more likely, we will see 18,000 mark before we see more than 20,000? I don’t go by prediction of the indices, but I see that pockets of value available for long funds like us, are limited. I don’t see much money coming into these valuations. Right now, we are not seeing much of selling even by the P-Note holders, because they can’t buy anything.

There is an absence of selling rather than large buying taking place, therefore markets are holding on and they may hold on for some more time until selling takes place.

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