Though he agrees we are in a bull phase and things are looking positive, yet he believes is the market is also equally expensive at this point of time. “It is not a cheap market where rally is for a given in terms of share price. It can be a rally for the broader market but for individual shares everything is at PEs of 30 and above,” he said.
Below is the transcript of Ajay Srivastava’s interview with CNBC-TV18’s Sonia Shenoy, Latha Venkatesh and Anuj Singhal.
Latha: Do you feel as good, has any Samavat felt as good in terms of a longer term hope for the economy and for the markets, I can’t remember one probably 1991 felt like that I wasn’t around covering markets then.
A: Things are looking pretty good at this point of time. Things are looking fine. I keep saying the caveat is that even in the boom rally it is not easy to make money. It is not like you splurge on equity and you are going to make your money here. So, even in this rally which we expect to continue, we expect lot of good things from the government to happen, I think there is a flip side.
The flip side is that we are so dependent on international flows that you saw what happened two weeks back or less than 7 days back. So, let us put a caveat to ourselves saying international flows make a difference to us irrespective of what we do. Number two is, the local demand. Local demand needs to get up to something which is sensible. It is not automatically that the demand is going to go up because you are having a fiscal deficit problem where you are compressing the expenditure. So, things are looking good, government is saying nice things but this is a rally driven by global liquidity not just by Indian factors. You have seen what has happened last week, it is a testimony to that. So, I would put a caveat to say buy sensibly if you have to make money even in this rally. Wrong purchases, wrong timing could end up into still losses in spite of a point to point rally that you see.
Latha: Do you think the global cues which looked fairly negative two weeks ago look a little less, Europe has just pulled back from recession, expectation of the PMI was 49.9, that would be contraction but it has actually come at 50.7 compared to 50.3 in the previous month that is September. So, are we just about not as bad as we thought we were 2-3 weeks back?
A: Things change so fast, in a weeks time we were like in despair, less than a week back we were fine and naturally hopeful. Let us not forget that the Indian markets are at a very expensive inflection point today. None of the stock that you can pin point are cheap at this point of time which means that they have to generate earning disappointment. You saw what happened with Infosys , TCS etc could lead to a great amount of discomfort in the market. So, yes there is a bull rally, yes things are positive but I also believe that market is also equally expensive at this point of time. It is not a cheap market where rally is for a given in terms of share price. It can be a rally for the broader market but for individual shares everything is at PEs of 30 and above.
Sonia: We were speaking with Ramesh Damani yesterday in fact Latha was speaking with him and he said that the Japanese bull market lasted for 25 whole years. It is very difficult to predict how long this bull market will last but are you getting a sense that with all the cues stacked up this could be at least half a decade bull market for India now?
A: I see no reason. Ramesh is right absolutely, there is no doubt that we should see the onerous burdens of the last few years, one of the biggest onerous burden was corruption in the system, it seems to be prima facie under control or getting under control at this point of time. I think that should give us lot more resources to play with, lot more efficiency in the government etc. However it is all untested at this point of time to say that we have a 20 year rally. I would still say yes India should grow. At the end of the day half a billion of the people don’t even have full food to eat.
So, if they want to eat and have clothes and housing etc we should be growing at 6-7 percent for next 20 years, there is no doubt in my mind. However I would still put a caveat there to say that we still need to find a way to become a more efficient producer. We are a high cost economy at the end of the day. So, intentions are good everything is good but to get the bull run, Japanese were the most efficient producers if you look at the bull run they were the lowest cost producers in the world for 20 years that you are talking about, we are not today. So, analogy is good but we have lot more challenges to us than perhaps the Japanese had at that point of time.