After the monetary policy falling in line with expectations, investors are eagerly waiting for the fourth quarter results. Tushar Pradhan, chief investment officer, HSBC Mutual Fund, expects a flat March quarter year-on-year. He expects recovery only in the second half of FY17 and believes cyclicals will.take time to lead the same.

Below are edited excerpts of the interview:

Why do you think equity markets fell yesterday despite 25 basis points cut by the Reserve Bank of India in line with expectations?

Since the market had already expected a 25 basis points cut, I don’t think the markets reacted to the rate cut. But a part of the market was also expecting 50 basis points cut in policy rates that could seem to have disappointed the market. While the number of people expecting that was not large as the market had already discounted a 25 basis point rate cut given the moment in G-sec yield before the policy.

Yesterday’s equity market fall had nothing to do with the RBI policy. It has probably got more to do with Panama papers. European markets opened down strongly by 1-1.5% in reaction to the ongoing scandal and I believe our markets moved in tandem.

Cyclicals led the fall yesterday. Will you be a buyer?

We have remained underweight on cyclicals for the last 12 months. But we do believe that the economic cycle is kind of bottoming out. If cyclicals continue to fall more from here, we will probably look that as an opportunity though not in a very big way…It is going to be take some time for cyclicals to gain from budget announcements and rate cuts….

What is your expectation from the fourth quarter results?

We are expecting recovery only in second half of the fiscal. We expect a flat March quarter year-on-year but slightly better than December quarter.

What is your expectation on the 10-year benchmark yield?

We expect G-sec yield to be in a range of 7.4 to 7.7 per cent. RBI’s comment on having a neutral liquidity situation is a clear signal that there will be OMOs that will support the market. So open market operations activity will be fairly high.

From May and June, supply of G-secs will start building up as the government will start borrowing, states will start borrowing and Uday bonds will be out. There will be natural pressure on yields going up because of the sheer supply.

What is your view on future policy actions?

According to us, rates from here on should be looked at from an effective perspective not really whether RBI does 75 or 50 bps. Anyway, we expect this year to be a rate cut year. So, for the entire year, optimistically we expect 75 basis points cut or in other words another 50 bps cut from here. On a conservative or reasonable basis. I expect another 25 basis points cut from here.

Are you looking at any new fund launch?

We always are on a lookout for innovative ideas to bring to the market.

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