Hailing the Reserve Bank’s move to pare repo rate by 25 basis points , Raamdeo Agrawal, joint managing director, Motilal Oswal Financial Services, says the cut was imminent for the Indian market due to global deflation and fall in inflation.
In an interview to CNBC-TV18, Agrawal says the rate cut will give a momentum to the economy and he sees more rate cuts in the upcoming days.
“But don’t try to time the market,” advises Agrawal who believes that retail investor participation will now increase significantly.
“Though we may not get very large foreign instituitional investor (FII) flows, if we get USD 15 billion from FIIs and a similar figure from domestic instituitional investor (DIIs), then we’ll still be very comfortable,” he adds.
Below is the verbatim transcript of Raamdeo Agrawal’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Anuj: It is a big day for Indian market; we have seen a big rally, almost 500 point rally on the Sensex. Do you think it is a bit of a game changer for our market?
A: The rate cut was imminent. We did not know the time because of the kind of press release we use to get from Reserve Bank of India (RBI). It was imminent but whether it is going to happen in February or it will go to March, which we were not clear and it came up suddenly this morning. Till about 7 o’clock this morning, people were thinking that the market will be down today and then suddenly this change come, maybe headlines about global deflation in Financial Times (FT) and yesterday’s our own Wholesale Price Index (WPI) decline or muted kind of a number must have combined — doing this morning – maybe the headlines about the global deflation that fear and US rates coming down to 1.8 or something like that must have triggered RBI thinking in terms of pushing the rate. This morning’s the entire forex reaction was a bit of surprise to me that there is so much of impact of 25 bps but what it means is that from here onwards the foot is not on the brake nor on the accelerator. So it will give growth momentum to the economy and we are going to see series of rate cuts.
Anuj: It looks like we will have more rate cuts and it looks like the rate cuts will now be passing on to the system. One bank has already cut and we believe all banks would cut rates by at least 25-50 bps and there is a good chance of further petrol and diesel price cuts as well. Do you see a lot of domestic investments now flowing into equity market and that being the next trigger for the market?
A: For last 10-12 months retail and domestic investors have been relentlessly putting money in. Last month almost a billion dollar from domestic, it will further gain momentum and those who are sitting on the fence — one message must be loud and clear that nobody can time the market; the guys who were waiting for some kind of timing the market that should I do today, should I do it tomorrow. However, best of the guys didn’t know that today market will be up by 500 points. Therefore, now people will realise the futility of waiting for when to buy. I think they will buy now. So my sense is that now people will come in with lot more vigour buying into equities.