In an interview to CNBC-TV18, Ritu Arora, Director – Investments, Canara HSBC OBC Life shared his reading and outlook on the market.
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Below is the transcript of Ritu Arora's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Anuj: What is your call on the markets now? We have seen one way rally. Do you think once the actual numbers are out, there is scope for some profit booking or do you see this as a base of a new bull market?
A: At this point, market is poised at 16 times FY15 forward and this is a reasonable level considering that the economy still has challenges in terms of fractured growth, inflation, currency has been under pressure. Given that there is a tall order in front of whichever government comes into power. For now, the market is very poised; I do not see a very big upside. On the upside it would be 7,500 and the bottom 6,500, this is 5 percent upside from here and about 10 percent correction if there is disappointment. Beyond which, I think market will wait for a change in trajectory fundamentals improving and demonstration by the government of tangible action which should take the market to new highs. But a decisive government definitely gives us a confidence that the worst is behind us and there could be a strong couple of years ahead for the equity market.
Ekta: How would you be adjusting or positioning yourself in terms of a portfolio post May 16?
A: This is a good time to pause, reflect and wait for May 16 to play out because stocks have already rallied in the last three days, we have seen almost a 7 percent run up. I believe there will be opportunities to realign the portfolio. If we do see a decisive mandate as one is anticipating, we would like to start building in stocks, which we believe will lead the economic recovery back into the portfolio. Some of them have run up but if you look at from their peak valuations and possibilities with recovery, they will still look attractive. Hence, I would wait for the government to form and then do a realignment, at that stage a realignment definitely is warranted.
Ekta: How you expect the macros to pan out in FY15, do you expect a formidable improvement in the macros and that would possibly help in further upside for the equity markets as well?
A: I would like to believe that we have seen the bottom and the worst is behind us. Then I think the first few indicators will come from the budget that will be the first large announcement from the government. I am hoping to see two changes there. One an improved revenue collection and hopefully also some schemes, which will bring back small savings back to financial market.
On the expenditure side, I hope consumption spend will be capped. We already have a fair bit of social spending and not much more will be added to that and capex will be bottom to focus, there would be some movement on stalled projects and I think that will start changing the macro picture. Markets always discount either the fundamentals and also the future expectations, I think this will set the tone in a tangible manner for future expectations on economy.
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