Rashesh Shah, MD & CEO OF Edelweiss Capital said that he expects the Reliance Power IPO refund from tomorrow. The arbitrage spreads will not be good on low volumes, he added.
Excerpts of CNBC-TV18's exclusive interview with Rashesh Shah:
Q: What is this price action telling you? We have had a 50 bps rate cut and we are down 300 points this morning?
A: I think the market is trying to find its own stabilisation level and the same thing happened in the US markets etc. It seems like the market is recovering from the shock of the last eight-ten days, but on the whole, with the rate cuts and the way quite a few stocks in India have corrected, I think investors are seeing that and now there are good opportunities to buy. However, I don't think anybody is going to come back in a hurry but slowly as the market stabilises. The important thing is that everybody is waiting for the markets to stabilise a bit, which should happen maybe over coming eight-ten days.
Q: What's a sense you are getting from the institutional front. Are global investors also turning little skittish about putting money to work in Asian markets etc just in the near-term?
A: I think it is largely liquidity driven. In the last year about USD 40 billion came into emerging markets fund globally. In the first three weeks of January, we haven't got the fourth week's details yet, but about USD 13-14 billion have gone away from emerging markets. So though quite a few investors and fund managers are now seeing that there are good investment opportunities in India, there are good buying opportunities, I think the global liquidity cycle is currently against all emerging markets. I think it's happened in Asia and all the markets have gone down. But slowly, as the funds flow comes back again to emerging markets, which with the US currency fall, should start happening, I think once liquidity is eased, and especially after the refunds from all the IPOs also start coming back in, we should expect to see investment based small buying to come back.
Q: How soon are you expecting that money to come into the system from Reliance Power etc?
A: I think Reliance should start sending refunds either by Friday or it should hit investors either by the end of Monday or early Tuesday. So I think the Indian mutual funds, the QIBs and all will get quite a bit of cash flow as a result of that.
So there should be some liquidity easing off and along with that, emerging markets should also get some fund flow in the coming few weeks from the US. So overall, as liquidity eases up, investment buying will happen.
There is no question in everybody's mind that increasingly it's a fairly attractive market, especially given India's growth and that quite a few stocks have still been showing fairly good earning growth. Everybody is waiting for things to stabilise and liquidity to ease off.
Q: There are some indications though that there might be some payment problems cropping up today as well because we are in the process of moving into a new series. Have you heard anything about that as well, especially on the midcap side?
A: We haven't heard anything. I think all the exchanges and all have been fairly adapt, fairly prompt. I think the liquidity crises, because of the F&O fall about a week ago was there a bit, but after that, things have eased off.
Q: Do you sense a 'don't buy yet' kind of syndrome in the market because people believe that they will get better prices over the next couple of weeks or so, or next month or so?
A: I think either investors or fund managers who are more trading oriented are thinking like that. But more investment oriented fund managers are starting to say that good opportunities are there, everybody is waiting for liquidity to ease off, things to stabilise a bit because nobody wants to put their hand out in the falling market. But once a bit of a stabilisation and a bit of liquidity ease off; I think investment oriented buying should happen. I think trading oriented will go with the flow in that sense.
But I don't think people are overly concerned about company valuations as of now, which was there maybe three-four weeks ago. But now, I think, it's more liquidity and stabilisation that's the theme.
Q: What's happening on your arbitrage desk at Edelweiss? How has the experience been these last couple of weeks?
A: I think arbitrage is fairly steady as open interest has been falling and as one would have seen, spreads have come down between cash and future because the entire future open interest has come down. So usually arbitrage expands in a good market and contracts when the volumes are down, when open interest is down and when optimism is down.
So we should expect the next few weeks, the arbitrage spreads will not be as broad as they were earlier. It always happens. I think there are about five-six months in a year where arbitrage spreads are down and there are five-six months where arbitrage spreads expand.
Q: If the markets were to show you deeper cracks in the next few days i.e. break that lower end of the band for most people of 5,000, do you think we might be heading for significantly lower levels, or will it more or less consolidate around that point?
A: I think when you speak with investors and all, it seems to be more consolidation oriented. There doesn't seem to be anymore panic or sudden crash aversion kind of a thing. Most people are saying, "We will wait it out to buy." I think all through February, people will start accumulating stock, at least investment oriented buying, slowly.
But other than that, we are sensing any panic of suddenly the market, if it falls what will we do? Everybody is saying that if it falls, maybe it would only be for global reasons. Also, if it falls, it will be an attractive buying opportunity kind of an approach we are starting to see which, was not there a week ago.
Disclosure:
It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.
Source : MoneyControl
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