Gopal Agarwal, Head of Equity of Mirae Asset Global Investment India said global and domestic liquidity for equity markets is quite good. He told CNBC-TV18 that the Budget has focused on consumption-led growth and is positive for the medium-term. However, in the short-term, there are no triggers seen for the markets.
"It is only the risk aversion, which is happening, because of the bad news that we are getting continuously from the Western world and also the Budget is unable to give you any great fillip to the market in the shorter-term. This Budget has focused a lot on consumption-led growth and it is a positive in the medium-term definitely. We are very positive on this. But in the shorter-term, you have not got any short-term triggers for the markets in which we are," he added.
Excerpts from CNBC-TV18’s exclusive interview with Gopal Agarwal:
Q: What is your call on the banking space as a whole?
A: We really don’t know how the government will compensate the banking sector on the waiver of agri-loans. So, this is a short-term negative and we have to see the government’s initiative on this. It will decide the fate and the valuation of the sector. Till date, I really think there will be de-rating of this sector and PSU banks will especially have a tough time.
Q: Give us an idea of the treatment of STT. It is to be treated like deductible expenditure. What is the rationale behind it? Would this possibly result in any kind of double taxation?
A: STT is going to impact liquidity in the market because the transaction into futures will go up by around 70%, as per our calculation.
So, the government might be looking forward to weed out the speculator from the market and have a long-term call. That is why short-term capital gains tax has also been increased from 10 to 15%.
It is like the long-term player should be there in the market and that is the policy the government is looking forward to.
Q: What is your assessment on liquidity in this market in the context of what is happening globally? Between now and running up to March 18, do you see the liquidity picture changing substantially? Could it take us significantly higher from where we are right now?
A: The liquidity in the system is quite good. Globally, oil is trading at around USD 100/bbl. Global liquidity is quite high because of this. With respect to domestic liquidity, Unit Linked Insurance Plan, or ULIP, is likely to collect around USD 10-11 billion through their offerings and the mutual funds are also sitting on cash.
On that perspective, global liquidity and domestic liquidity for the equity market perspective is quite good. But it is the risk aversion happening because of bad news, which we are getting continuously from the western world.
The Budget is unable to give a great fillip to the market on the shorter-term. It has focused a lot on consumption-led growth and is a positive in the medium-term. We are very positive on this. But in the shorter-term, there aren’t any short-term triggers for the Indian markets.
Q: How would you expect ferrous and the non-ferrous side to pan out ahead?
A: Our house view is that we are very bullish on ferrous metal because there is a real short supply of thermal coal, coking coal and iron ore. So, the steel prices will remain very strong because of the cost pressure.
On the non-ferrous side, we are very bullish on aluminium. As a commodity, it will do very well. On zinc and copper, we would see that there would be supply exceeding demand. But because of the dollar depreciating against the euro and the yen, there is short-term commodity inflation. In the medium to long-term, zinc and copper prices will correct while aluminium will remain strong.
Source: Moneycontrol.com
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