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Rocking Budget, rate cuts can bring FIIs back: Udayan

After a stellar run last year, the market opened 2015 on shaky ground, mostly on the back of weak global cues. However, some analysts are not worried and still believe that returns could come in the range of 20-25 percent this year as well.

Udayan Mukherjee feels that one needs patience to see how the market performs. “We have got used to seeing market going up 4-5 percent every few weeks. But some factors, both fundamental and technical, are a bit disappointing now. We need a little bit of patience and ride out the next 4-6 weeks.”

December was not a great month in terms of inflows, where FIIs pulled out about Rs 4000 crore. Even January has not started on a great note, says Udayan. He feels the reasons could be — current global risk-off, China’s outperformance and fear of subdued third quarter earnings. He expects markets to be volatile within a range (Nifty at 7900-8300) till there is some conclusion on the Greece problem. According to him, the next big triggers for the markets are Budget and RBI’s Monetary Policy in April.

Below is the transcript of the interview 

Latha: Will it be a happy new year for the bourses for Indian indices this year. Routinely a lot of the analysts are giving us between 20 percent and 25 percent gains for the current year as well but fundamentals are little questionable and we are always finding 8,600 a difficult hurdle to cross?

A: We will need a little patience here because my sense is that we have got use to the market going up 4-5-6 percent every few weeks and some of the factors that you alluded to, fundamental and technical as well, are sort bit disappointing right now. So, we need little patience out here and ride out the next four-six weeks because the market is dealing with not just fundamental issues but a few technical issues.

December was not a great month from flows perspective, FIIs pulled out about Rs 4,000 crore and even January has not started on a great note. There could be a whole lot of reasons for that. One could be the global risk off which is making investors a little shy of emerging market investing at this point in time, there could be China outperformance which could be weighing on investors putting incremental money to competing markets like India – that could be one reason. The other could be that we are walking into an earning season which is not expected to be exactly great here. So for various reasons it is possible that FIIs for the moment have taken their foot off the paddle and that is leading to a bit of difficultly on the part of the market to edge higher. Last year was a great year for FII flows and the market kept on making new highs because at every level there was cushion of fresh liquidity coming in which has not been there for the last five weeks. So there are fundamental issues, there are global issues but there are technical issues as well right now which are preventing the market from going up. 

The last time we spoke, there was some talk about Credit Suisse report about how many of the sovereign funds might not be able to pull in as much money into market like ours because of the way crude has collapsed and these things are very difficult to prove and certify on a weekly or daily basis but the fact that the last five weeks have been disappointing in terms of flows coinciding with a complete meltdown in the price of crude might also add some credence to the talk that was going around a few weeks back. 

Sonia: How worried would you be about this global scare, is it just noise or does it have the capability to derail global equity markets including markets like ours?

A: The last couple of times we have been scared but we have not been roiled to a great extent. Every time we have jumped to say this is the big correction and what is going to happen with global markets. It has just been routine correction and market has bounced back. It is difficult to say whether this time is a bigger correction which is looming because of global factors also this will be manifest over the next few weeks. However, between now and January 25, you will hear good news and bad news like last night was a bout of not so bad news and market responded positively. Who knows two days later you will hear something opposite and market may fall once again. 

I think right now in the next three four weeks till we have some kind of conclusion on the Greek problem, market might be volatile within a range both currencies and stock market and traders might be in a somewhat tight spot at this juncture. On bad days they will short the market then the market will give them bounce back and once again they will be caught on the wrong foot. 

My sense is that over the next few weeks you might see the Nifty in a fairly volatile situation between 7,900 and 8,300. It is only 400 points but if you are on the wrong side of 150 point Nifty move, it may make you look silly. This is not a great time for traders to jump in and take big long or short trades. I think investors might cherry pick if the market goes down a lot but for traders it might be little hot to handle the way the volatility is shaping up over the last few days.

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