Share Bazaar News India

Ved Prakash Chaturvedi, MD at Tata Mutual Fund said that because of crude, inflation and pressure growth rates markets, may not recover right now. He believes that the market will see some of the lows seen earlier. He does not anticipate a huge crash right now as he expects a consolidation phase. And here the markets may probably see the levels of index seen in March, again, Chaturvedi added.

Excerpts from CNBC-TV18's exclusive interview with Ved Prakash Chaturvedi:

Q: Will we get away with these sort of levels or do you think that the March lows are now looming large over us?

A: Given the context of what is happening to crude prices worldwide and inflation in India; pressures on growth rates etc, it is difficult to be extremely sanguine about a recovery from here. I expect that we will see some of the lows seen earlier. But I don’t anticipate a huge crash. I think gradually there would be a consolidation phase where we may probably see the levels of the Index that we have seen in March again.

Q: How are you reading the political turf right now after the results of Karnataka elections and the kind of noises you have been hearing, do you think we should expect things to be sticky, politically from a stock market perspective?

A: You are absolutely right. I have been seeing this for some time - that as we move towards December and the election period, I think the noise from the electoral politics will start dominating. We have seen some early signs of that. As it happens many times in the market, good and adverse news comes at the same time. But at this point of time, most of the adverse news is coming together. The good thing out of all this is that most probably the markets will bottom out before say the newsflow or the economy does. We will have to anticipate that and keep our faith and advice investors to get invested at an appropriate time.

Q: What about the kind of actions that are being considered because of what has happened with crude prices? From a market perspective, how would you read this stock of a cess on taxes?

A: Any of this will certainly not be positive for earnings and hence for the market. So I would suspect that markets would show some concern. There is enormous concern about the fact that the recent almost doubling of crude prices has not been passed onto consumers in India. There is a deficit bubble building up there which at some point of time will have to get passed on and will cause its own dynamics. So as I said earlier, it is very difficult to be sanguine in this scenario.

Also what we will have to look forward and wait for is this entire increase in crude prices to have an impact on economic growth of the world. As economic growth slows down, crude prices will come down. Also the US elections and our own elections towards maybe early part of next year will be behind us. We can hope for a good period then.

Q: What about the sector that has got punished the most - banking? Do you see value there or do you think the headwinds will peg these stocks back further?

A: The value is certainly emerging there. But also the reality of the situation right now is that this is a sector unlikely to come back into focus right away; primarily because there is going to be an upward bias in interest rates if inflation trend remains where they are and which is likely.

There will remain enormous pressure on prices in the sector, which is a delight for value stock-pickers. But we will have to wait for sometime for this value to get unlocked. This year will go down as a year when the market consolidates and digests some of the bad news that came in the way. As we move towards early part of next year, we can hope for a period of good cheer for banking and the other sectors.

Q: How would you approach cement, now that the export ban has been scaled back to a certain quantity and only for one State - but as a sector how are you feeling about it?

A: We feel that prices are bottoming out. We are positive on construction-oriented sectors and we are long-term positive on this sector.

Q: What is the biggest risk to this market according to you from all the factors that you outlined? Is it global, is it inflation, is it politics, what is the single biggest factor that probably can knock us to levels even lower than March and January?

A: The good thing in this entire period has been the resilience that the domestic investor has seen. I can say for our own and for the industry that almost through this entire period of volatility, the investors have still been putting money. That resilience is certainly very important and has lent some stability to the market. The headwind has really come from overseas and that is where the real risk lies.

Oil prices keep going up or if they do not come down from here, if inflation continues to go up, if there is a cascading impact of all that in developed world and in emerging economies, it may lead to a significant slowdown of economic growth. Hence a loss of risk logs a pullout of money; we have seen some early signs of that already. All these will not be very positive for emerging economies in general and certainly for India. The real risk lies there and that is what we have to keep eye out on for the moment.

Disclosure: It is safe to assume that Tata Mutual Funds or I personally may have positions in the stocks/sectors discussed today.

Source: Moneycontrol.com