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Markets may consolidate at current levels: Birla Sun Life
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Vikram Kotak , Chief Investment Officer, Birla Sun Life Insurance in an interview with ET Now talks about the positive and negative impacts on markets and shares his views on stocks.
Last time when we interacted with you on this forum you were the only bearish fund manager in the town. Are you a bull, are you a bear, have you used the market decline to your advantage?
We were not bearish but cautious on few things which worry us like the inflation was on upstream in mid December, interest rates are high and the cost escalation to the country was very high. This is the reason why were a little worried and then things have moved very differently. Few things that have moved in the favour of the market is that valuation has become attractive because market has almost corrected by 15% to 18%. One more thing that is working in India's favour is that FIIs have not been selling the trade and they have been buying as there is no other trade in the world right now other than the emerging market because there is a question mark on the US recovery. Budget has been good and the liquidity situation in domestic market has improved post the March strain. There are many factors which have been very positive in the recent times.
Nonetheless does the euphoria without volumes pose a concern?
Yes, it has become more of a concentrated market and it is focussing on the large caps and few stocks and sectors. That is the way the market plays out because when you have the large institutional players playing around, then definitely you do not want to participate in every part and portion of the market. Hence, the focus is on the top 50 or 100 stocks.
You were bearish in the month of December because inflation was high and macro headwinds were also strong, but concerns are still there, why are you bullish now?
No, we are not bullish.
You are still bearish?
No, I am not. There is no question of bearish and bullish, it is a cautious view right now and the market will not go up too much from here. It has already given a smart 10% to 12% run in the last one month and the market should consolidate from here for sometime. Inflation is going to remain and the core inflation is going up which is impacting the corporate profitability. The rise in crude prices is also another concern because prices of $120 means $25 billion of either under recovery or you pass it on to the people at large. If you pass it on then there would be an impact on demand. If you do not pass it on, then either the balance sheet or the corporate will be hit at the end. There is going to be many more concerns going forward. Europe situation is still not very clear so there are concerns on one side and there are positives on another side, so market is balanced right now. It is difficult to say that the market is going to go up or down too much in a hurry, I think it is going to be balanced.
Last time when we interacted with you on this forum you were the only bearish fund manager in the town. Are you a bull, are you a bear, have you used the market decline to your advantage?
We were not bearish but cautious on few things which worry us like the inflation was on upstream in mid December, interest rates are high and the cost escalation to the country was very high. This is the reason why were a little worried and then things have moved very differently. Few things that have moved in the favour of the market is that valuation has become attractive because market has almost corrected by 15% to 18%. One more thing that is working in India's favour is that FIIs have not been selling the trade and they have been buying as there is no other trade in the world right now other than the emerging market because there is a question mark on the US recovery. Budget has been good and the liquidity situation in domestic market has improved post the March strain. There are many factors which have been very positive in the recent times.
Nonetheless does the euphoria without volumes pose a concern?
Yes, it has become more of a concentrated market and it is focussing on the large caps and few stocks and sectors. That is the way the market plays out because when you have the large institutional players playing around, then definitely you do not want to participate in every part and portion of the market. Hence, the focus is on the top 50 or 100 stocks.
You were bearish in the month of December because inflation was high and macro headwinds were also strong, but concerns are still there, why are you bullish now?
No, we are not bullish.
You are still bearish?
No, I am not. There is no question of bearish and bullish, it is a cautious view right now and the market will not go up too much from here. It has already given a smart 10% to 12% run in the last one month and the market should consolidate from here for sometime. Inflation is going to remain and the core inflation is going up which is impacting the corporate profitability. The rise in crude prices is also another concern because prices of $120 means $25 billion of either under recovery or you pass it on to the people at large. If you pass it on then there would be an impact on demand. If you do not pass it on, then either the balance sheet or the corporate will be hit at the end. There is going to be many more concerns going forward. Europe situation is still not very clear so there are concerns on one side and there are positives on another side, so market is balanced right now. It is difficult to say that the market is going to go up or down too much in a hurry, I think it is going to be balanced.
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