“Sanity should return to the market and sentiments will improve once there is some resolution to problems at Infrastructure Leasing and Financial Services,” said Arun Thukral, MD and CEO, Axis Securities. In an interview to BusinessLine , Thukral highlighted global headwinds but said the stock markets will continue to follow the strong signals from the domestic economy. Edited excerpts:

What do you make of the recent developments in domestic equity markets?

The main problems are those relating to IL&FS which are quite real and we expect some resolution given that the government, RBI and SEBI are very serious about it. As of now, IL&FS has already defaulted on some payments. There has been a ripple effect, as was seen last Friday with DHFL when DSP sold some paper at a high yield and then the rumour mills started and the sentiment was impacted. It will be relatively difficult for NBFCs to raise money at the right kind of pricing in the immediate future. That will trouble the market further. Once we solve the IL&FS problem, sanity should return to the market and sentiments will improve. But as of now, these are tough times.

How important are factors such as crude oil prices and weakening rupee on the markets?

Globally, there are a lot of headwinds. We are more or less near the fair value of the rupee at 72-73 against the US dollar but it could be a problem if it weakens further. We have to see the impact of the government measures for the rupee. Crude has gone up further. The Iran sanctions have to come in November. If that happens, the demand-supply gap will further worsen and there will be pressure on the CAD.

The US and China have increased tariffs and it is a real trade war, which will trouble the market. The US Fed is meeting and rates will increase and we also have our policy meet in October and there is an expectation of a further increase in rates. So, these are tough times. The retail investor can still find value in these opportunities.

Do you expect markets to recover?

This year there has been negative growth of FIIs and in fact, $1-billion CYTD (calendar year-to-date) has been taken out. The only silver lining is that DIIs and domestic MFs are still investing. The retail investor has now matured. We have seen this kind of panic situation earlier but this time on Friday when DHFL crashed I could see some panic returning in the market. There are so many headwinds. But sectorally, sectors such as IT and pharma are doing well. Our domestic growth story is still strong and the stock market will follow the same.

Market-cap is usually at 85 per cent of the GDP. With three good monsoons, rural and urban consumption is going up and it will help FMCG companies. Penetration of white goods is still low, per capita is growing, likely to cross $2,000 this year, could lead to much higher discretionary spend. In the medium- to long-term, we are still bullish but now in the short term, say in the next few months, maybe one year due to the politically heavy calendar of elections, it will be a little volatile.

What are the plans of Axis Securities?

We are one of the fastest-growing retail equity broking houses for the last few years. We are a bank-led broker. AxisDirect plans to stay agile and lead technology innovation by taking big strides in the mobile space by leveraging next-gen technologies primed with Artificial Intelligence and Machine Learning. We also aim to provide simple yet powerful and highly personalised user interface to our customers.

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