Seasoned investors have an opportunity to accumulate quality stocks: Angel Broking

With global markets increasingly rubbing off on one another as they become more integrated, trading in India also joins the sway. Developments in the US and Europe affects Asia with countries such as Japan, Korea and Taiwan dependant to a large extent on export income.

Nevertheless, Thursday's market ended in red here, despite Dow Jones finishing 140 points positive on Wednesday, which influenced many Asian indices. Expiry of future contracts on Thursday has been advanced as reason. In fact, even downgrading of the Japanese government debt by Moody's did not prevent Nikkei index surging today, making it clear how difficult it is to predict market mood.

In an interview to Business Line , Mr Dinesh Thakkar, Chairman and Managing Director of Angel Broking, Mumbai, talks about the impact of global indices on Indian markets and feels European markets need to be watched.

Do you think that de-coupling of the Indian markets from global markets is really happening? If not, why?

India's GDP remains relatively less dependent on exports (exports to GDP of 20 per cent vs. 25-50 per cent for other EMEs) and its relatively higher current account deficit as a percentage of GDP vis-à-vis peers is likely to limit the extent of appreciation in rupee vis-à-vis the dollar, improving the relative competitiveness of Indian exports.

Domestic bourses move partly in line with the global markets. While the domestic economic climate plays a pivotal role in the capital markets, one cannot rule out the volatility in the near-term due to our strong linkages on the capital front with the global markets. The global markets are currently pressured amid possible recessionary wave in the US and debt concerns across Euro zone. However, India remains structurally strong with sustainable growth outlook. Corporate earnings and growth outlook are likely to improve as soon as domestic bottlenecks: high interest rates and inflationary pressures, ease. Hence, the bourses offer good entry level at this juncture for long-term investors.

Is being impacted by global markets a boon or a bane for India? Do you think the dependence on FII investments is working against the Indian markets and investors?

India is an emerging country and a growth potential of 8-9 per cent per annum makes it imperative to integrate with the global capital markets and attract sizable capital to the country. With pessimism currently encircling the markets, volatility is at the forefront thereby creating a fear factor for FIIs. Compared to other emerging markets, we have amongst the strongest long-term fundamentals. This is bound to attract quality foreign investors with longer term horizon to allocate more and more capital to India and Indian markets are bound to recover as was seen in 2008.

Much has been said about Indian economy not being influenced by global developments. Is that happening?

During 2008 financial crises, many developed economies were paralysed but India weathered it and managed to deliver a satisfactory GDP growth 6.8 per cent for FY2008-09. Going by the current situation also, India is relatively better placed despite global macro headwinds. Global macro worries will not impact the Indian economy in a major way, it is more about the near-term global uncertainty creating volatility in the markets, but the underlying fundamentals look better than most other markets. Valuations are also much cheaper than December 2007 levels, providing better margin of safety this time around.

Which global indices the investors in India now watch out for the most –Asian, European or the US? What are the reasons for that? How do they influence the markets?

Clearly, both, European and US markets will remain on the investors watch list. The developments in Europe are weighing on the bourses – failure to chart a concrete strategy will prove catastrophic for the global markets. Nonetheless, worries of a US slowdown will also affect the markets as sentiments remain weak on the world's largest economy.

On Tuesday, the Indian equity markets ended on a positive note because of European markets (and ended in the red on Thursday though many other major global markets were in the green). Will not such swift turnarounds in markets keep investors spooked?

Domestic markets have witnessed volatility for the quite some time now and any small positive development will push the markets in the positive territory, while a negative development will pull down the market considerably. This is where seasoned investors have an opportunity to accumulate quality stocks in their long-term portfolio at dips.

How do the day traders adjust to market movements in such a scenario?

Ideally, a day trader should be a person who can dedicate time towards using the charting tools to trade. In terms of technical analysis, the news is almost always factored into the stock prices before it actually flashes on the televisions screens. A seasoned day trader sees the prices reflecting the positive or negative news which is about to be declared and day traders should in fact never use news already declared by the media. The chances of them making money by trading on the basis of news are slim.

The inflows into mutual funds are heavily loaded in favour of debt funds rather than equity funds. Is this working against investors since MFs could not take long-term calls on equities?

The SEBI guidelines reduced the incentive for distributors impacting MF inflows. More importantly, over the last 4- odd years, retail investors have not made much money in the equity markets, that affected their interest to an extent. However, this is a temporary phase as investors will re-enter equities with the onset of improved investment climate.

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