Reliance Mutual Fund Equities Head Sunil Singhania in an interaction with Sowmya Kamath says though concerns remain about where the stock markets are headed, the sentiment remains positive from medium- to long-term perspective.
With the spurt in the Indian stock market in the initial months this year, where do you see it heading?
We remain quite positive from medium-to long-term perspective. However, there are obvious concerns for the market, both fundamental and non-fundamental. Oil prices are high and the interest rate cut which we are expecting might be deferred.
On the fundamental economy side, there is concern over fiscal deficit. With subsidies rising, the possibility of fiscal deficit coming under control is under question. The specific deficit percentage is not so much of a concern, but the path forward in containing it is what the street will be looking at.
When we meet investors both domestic and globally there is more interest in investment in equity markets. Also, on the companies side the balance sheet are much stronger than they were in 2009. Demand scenario at the grass-root level is very strong. India is a very attractive destination. There is no reason why investors will not be interested.
What is the downside risk to the Indian market?
In the near term the market might move in a range, but there is very little probability of it crashing. The possibility of negative news flowing seems to have already been factored in. Global markets are quite strong and concerns related to euro and Greece have also sort of abated with refinance of part of Greece's debt.
There is definitely a surge in liquidity specifically in the euro region and that is leading to money flowing into emerging markets, including India. Ultimately, there has to be some long-term solution to the euro problems. But in the near term I don't see that as an issue.
What is your view on inflation? Do you see the rising crude oil prices playing spoilsport?
There are two ways of looking at it. The government seems to have realised to some extent is that just by increasing the interest rates, inflation will not come under control because oil prices have nothing to do with interest rate rise. So it's an uncertain kind of environment.
We believe that probably CRR cut will be the order of the day and as and when RBI gets more confidence that interest rate reduction will not impact inflation that is when they will start reduction of interest rates.
How do you see IPO market shaping up? Do you think the conditions are conducive for new public issues?
It will depend on the pricing of the issues. There will be interest if the offers are priced properly. For example, the recent MCX IPO got a good response from investors. Companies and merchant bankers should realise that if there should be some gains left on the table.
Which investment approach should an investor adopt at this point of time?
I would suggest a buy and hold strategy. There are several stocks-specific opportunities in the market. Fundamentally strong stocks which have become undervalued are probably the stocks to look at.