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Friday, May 9, 2014

Avoid big bets now; budget & monsoon key triggers: Ajay Bagga


Long time market watcher Ajay Bagga advises investors against taking any big calls at this point in time. He expects Budget and monsoon to play a major role over the next few months. "India remains an attractive destination for international investors," he told CNBC-TV18. Bagga expects money flow into India to rise irrespective of poll outcome. He prefers private banks over PSU banks. He is also positive on consumer discretionary and capital goods spaces. He says investor can bet on midcap space if bullish on Indian economy.
Below is the interview of Ajay Bagga with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
 Latha: What is your view on the immediate run up? Also, will you advise investors to dip their toes in? 
Ajay: It’s a very tough call to make and only on the May 16 will we now as to who is right and who isn’t. So, it is better to stay on the sidelines. As we are witnessing in the market itself, after a five-day fall, it was only yesterday that it picked up. But then again, in the last hour, we saw some selling coming in. So, I would say that the people are lightening their positions and waiting on the sidelines. Taking a big call right now isn’t worth it. Of course, given a long-term perspective, being, as you have already mentioned—a six-month or a six-year period, one should definitely buy. But you can also wait out and see what happens on May 16, by when you will get some clarity and then the next event will directly be the July budget. So, with the new government, you might see some announcements and some market euphoria coming in. But the main crux would be the new budget and the monsoon season. Monsoon has considerable impact since agriculture constitutes 13-14 percent of the GDP and 49 percent of the population is dependent on it. And if you see the derived consumption coming out of agriculture, then the impact of monsoon-- mainly the southwest monsoon, which causes three-fourths of the annual rainfall, is huge and is not looking too good, as per early predictions.

Sonia: So far the market has discarded all the global fears with respect to Ukraine, do you think that it will come back to bite the market post the election results or do you think that Ukraine is not a big issue?
Ajay: It is very difficult to comment on the issue of Ukraine. Though the Europeans who are nearer to the troubled spot seem to be calmer than the Americans, the issue could easily escalate, at a quick pace. So, I would consider that as one way of looking at it. It is probably being portrayed bigger than it actually is, since had it been otherwise, the Germans would have been more bothered than the Americans are. So more than Ukraine, I think, overall, on a one year basis, the rise in interest rates in the US -- the taper comes off by October, the Fed, the bond buying programme-- which goes off at current rates and then, once the rates start going up, what happens to the global liquidity will be something to look at. Peripheral Europe is recovering very fast. Once it has recovered, more investments will go into peripheral Europe and Eastern Europe than in emerging Asia. These will then turn into bigger factors but even then, India stays as a very attractive destination. We have been under-owned and even in valuation terms, we have seen the FIIs increasing their holdings in India while promoters and domestic investors have been on the sidelines or exiting. So, I would expect more money to come in; irrespective of what happens on May 16 on a one year basis.

 Latha: For a stock-picker, is it a good time to get into public sector undertaking (PSU) banks; which is the big cyclical play everyone is talking about at present?
Ajay: Yes, I think that the smart money is talking about it. They have been hammered quite a bit. One word of caution from my side would be that-- given the basel guidelines, you will have equity dilution throughout. So, if you are talking of something like Rs 500,000 crore of capitalization for tier-I and tier-II, you will keep getting diluted if you are at half time the book or one time the book, unlike the private sector banks where you are getting valuation premium and have a much higher beta with a growing economy. Therefore, valuation wise PSU banks have a lot of overhang of non-performing assets (NPAs) and equity dilution. I would say that a closer bet would be private sector banks since you will probably make more money on them.

Read more at: http://www.moneycontrol.com/news/market-outlook/avoid-big-bets-now-budgetmonsoon-key-triggers-bagga_1079947.html?utm_source=ref_article

hhLong time market watcher Ajay Bagga advises investors against taking any big calls at this point in time. He expects Budget and monsoon to play a major role over the next few months. "India remains an attractive destination for international investors," he told CNBC-TV18. Bagga expects money flow into India to rise irrespective of poll outcome. He prefers private banks over PSU banks. He is also positive on consumer discretionary and capital goods spaces. He says investor can bet on midcap space if bullish on Indian economy. Below is the interview of Ajay Bagga with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Latha: What is your view on the immediate run up? Also, will you advise investors to dip their toes in? A: It’s a very tough call to make and only on the May 16 will we now as to who is right and who isn’t. So, it is better to stay on the sidelines. As we are witnessing in the market itself, after a five-day fall, it was only yesterday that it picked up. But then again, in the last hour, we saw some selling coming in. So, I would say that the people are lightening their positions and waiting on the sidelines. Taking a big call right now isn’t worth it. Of course, given a long-term perspective, being, as you have already mentioned—a six-month or a six-year period, one should definitely buy. But you can also wait out and see what happens on May 16, by when you will get some clarity and then the next event will directly be the July budget. So, with the new government, you might see some announcements and some market euphoria coming in. But the main crux would be the new budget and the monsoon season. Monsoon has considerable impact since agriculture constitutes 13-14 percent of the GDP and 49 percent of the population is dependent on it. And if you see the derived consumption coming out of agriculture, then the impact of monsoon-- mainly the southwest monsoon, which causes three-fourths of the annual rainfall, is huge and is not looking too good, as per early predictions. Sonia: So far the market has discarded all the global fears with respect to Ukraine, do you think that it will come back to bite the market post the election results or do you think that Ukraine is not a big issue? A: It is very difficult to comment on the issue of Ukraine. Though the Europeans who are nearer to the troubled spot seem to be calmer than the Americans, the issue could easily escalate, at a quick pace. So, I would consider that as one way of looking at it. It is probably being portrayed bigger than it actually is, since had it been otherwise, the Germans would have been more bothered than the Americans are. So more than Ukraine, I think, overall, on a one year basis, the rise in interest rates in the US -- the taper comes off by October, the Fed, the bond buying programme-- which goes off at current rates and then, once the rates start going up, what happens to the global liquidity will be something to look at. Peripheral Europe is recovering very fast. Once it has recovered, more investments will go into peripheral Europe and Eastern Europe than in emerging Asia. These will then turn into bigger factors but even then, India stays as a very attractive destination. We have been under-owned and even in valuation terms, we have seen the FIIs increasing their holdings in India while promoters and domestic investors have been on the sidelines or exiting. So, I would expect more money to come in; irrespective of what happens on May 16 on a one year basis. Latha: For a stock-picker, is it a good time to get into public sector undertaking (PSU) banks; which is the big cyclical play everyone is talking about at present? A: Yes, I think that the smart money is talking about it. They have been hammered quite a bit. One word of caution from my side would be that-- given the basel guidelines, you will have equity dilution throughout. So, if you are talking of something like Rs 500,000 crore of capitalization for tier-I and tier-II, you will keep getting diluted if you are at half time the book or one time the book, unlike the private sector banks where you are getting valuation premium and have a much higher beta with a growing economy. Therefore, valuation wise PSU banks have a lot of overhang of non-performing assets (NPAs) and equity dilution. I would say that a closer bet would be private sector banks since you will probably make more money on them.

Read more at: http://www.moneycontrol.com/news/market-outlook/avoid-big-bets-now-budgetmonsoon-key-triggers-bagga_1079947.html?utm_source=ref_article
Long time market watcher Ajay Bagga advises investors against taking any big calls at this point in time. He expects Budget and monsoon to play a major role over the next few months. "India remains an attractive destination for international investors," he told CNBC-TV18. Bagga expects money flow into India to rise irrespective of poll outcome. He prefers private banks over PSU banks. He is also positive on consumer discretionary and capital goods spaces. He says investor can bet on midcap space if bullish on Indian economy. Below is the interview of Ajay Bagga with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Latha: What is your view on the immediate run up? Also, will you advise investors to dip their toes in? A: It’s a very tough call to make and only on the May 16 will we now as to who is right and who isn’t. So, it is better to stay on the sidelines. As we are witnessing in the market itself, after a five-day fall, it was only yesterday that it picked up. But then again, in the last hour, we saw some selling coming in. So, I would say that the people are lightening their positions and waiting on the sidelines. Taking a big call right now isn’t worth it. Of course, given a long-term perspective, being, as you have already mentioned—a six-month or a six-year period, one should definitely buy. But you can also wait out and see what happens on May 16, by when you will get some clarity and then the next event will directly be the July budget. So, with the new government, you might see some announcements and some market euphoria coming in. But the main crux would be the new budget and the monsoon season. Monsoon has considerable impact since agriculture constitutes 13-14 percent of the GDP and 49 percent of the population is dependent on it. And if you see the derived consumption coming out of agriculture, then the impact of monsoon-- mainly the southwest monsoon, which causes three-fourths of the annual rainfall, is huge and is not looking too good, as per early predictions. Sonia: So far the market has discarded all the global fears with respect to Ukraine, do you think that it will come back to bite the market post the election results or do you think that Ukraine is not a big issue? A: It is very difficult to comment on the issue of Ukraine. Though the Europeans who are nearer to the troubled spot seem to be calmer than the Americans, the issue could easily escalate, at a quick pace. So, I would consider that as one way of looking at it. It is probably being portrayed bigger than it actually is, since had it been otherwise, the Germans would have been more bothered than the Americans are. So more than Ukraine, I think, overall, on a one year basis, the rise in interest rates in the US -- the taper comes off by October, the Fed, the bond buying programme-- which goes off at current rates and then, once the rates start going up, what happens to the global liquidity will be something to look at. Peripheral Europe is recovering very fast. Once it has recovered, more investments will go into peripheral Europe and Eastern Europe than in emerging Asia. These will then turn into bigger factors but even then, India stays as a very attractive destination. We have been under-owned and even in valuation terms, we have seen the FIIs increasing their holdings in India while promoters and domestic investors have been on the sidelines or exiting. So, I would expect more money to come in; irrespective of what happens on May 16 on a one year basis. Latha: For a stock-picker, is it a good time to get into public sector undertaking (PSU) banks; which is the big cyclical play everyone is talking about at present? A: Yes, I think that the smart money is talking about it. They have been hammered quite a bit. One word of caution from my side would be that-- given the basel guidelines, you will have equity dilution throughout. So, if you are talking of something like Rs 500,000 crore of capitalization for tier-I and tier-II, you will keep getting diluted if you are at half time the book or one time the book, unlike the private sector banks where you are getting valuation premium and have a much higher beta with a growing economy. Therefore, valuation wise PSU banks have a lot of overhang of non-performing assets (NPAs) and equity dilution. I would say that a closer bet would be private sector banks since you will probably make more money on them.

Read more at: http://www.moneycontrol.com/news/market-outlook/avoid-big-bets-now-budgetmonsoon-key-triggers-bagga_1079947.html?utm_source=ref_article
Long time market watcher Ajay Bagga advises investors against taking any big calls at this point in time. He expects Budget and monsoon to play a major role over the next few months. "India remains an attractive destination for international investors," he told CNBC-TV18. Bagga expects money flow into India to rise irrespective of poll outcome. He prefers private banks over PSU banks. He is also positive on consumer discretionary and capital goods spaces. He says investor can bet on midcap space if bullish on Indian economy. Below is the interview of Ajay Bagga with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Latha: What is your view on the immediate run up? Also, will you advise investors to dip their toes in? A: It’s a very tough call to make and only on the May 16 will we now as to who is right and who isn’t. So, it is better to stay on the sidelines. As we are witnessing in the market itself, after a five-day fall, it was only yesterday that it picked up. But then again, in the last hour, we saw some selling coming in. So, I would say that the people are lightening their positions and waiting on the sidelines. Taking a big call right now isn’t worth it. Of course, given a long-term perspective, being, as you have already mentioned—a six-month or a six-year period, one should definitely buy. But you can also wait out and see what happens on May 16, by when you will get some clarity and then the next event will directly be the July budget. So, with the new government, you might see some announcements and some market euphoria coming in. But the main crux would be the new budget and the monsoon season. Monsoon has considerable impact since agriculture constitutes 13-14 percent of the GDP and 49 percent of the population is dependent on it. And if you see the derived consumption coming out of agriculture, then the impact of monsoon-- mainly the southwest monsoon, which causes three-fourths of the annual rainfall, is huge and is not looking too good, as per early predictions. Sonia: So far the market has discarded all the global fears with respect to Ukraine, do you think that it will come back to bite the market post the election results or do you think that Ukraine is not a big issue? A: It is very difficult to comment on the issue of Ukraine. Though the Europeans who are nearer to the troubled spot seem to be calmer than the Americans, the issue could easily escalate, at a quick pace. So, I would consider that as one way of looking at it. It is probably being portrayed bigger than it actually is, since had it been otherwise, the Germans would have been more bothered than the Americans are. So more than Ukraine, I think, overall, on a one year basis, the rise in interest rates in the US -- the taper comes off by October, the Fed, the bond buying programme-- which goes off at current rates and then, once the rates start going up, what happens to the global liquidity will be something to look at. Peripheral Europe is recovering very fast. Once it has recovered, more investments will go into peripheral Europe and Eastern Europe than in emerging Asia. These will then turn into bigger factors but even then, India stays as a very attractive destination. We have been under-owned and even in valuation terms, we have seen the FIIs increasing their holdings in India while promoters and domestic investors have been on the sidelines or exiting. So, I would expect more money to come in; irrespective of what happens on May 16 on a one year basis. Latha: For a stock-picker, is it a good time to get into public sector undertaking (PSU) banks; which is the big cyclical play everyone is talking about at present? A: Yes, I think that the smart money is talking about it. They have been hammered quite a bit. One word of caution from my side would be that-- given the basel guidelines, you will have equity dilution throughout. So, if you are talking of something like Rs 500,000 crore of capitalization for tier-I and tier-II, you will keep getting diluted if you are at half time the book or one time the book, unlike the private sector banks where you are getting valuation premium and have a much higher beta with a growing economy. Therefore, valuation wise PSU banks have a lot of overhang of non-performing assets (NPAs) and equity dilution. I would say that a closer bet would be private sector banks since you will probably make more money on them.

Read more at: http://www.moneycontrol.com/news/market-outlook/avoid-big-bets-now-budgetmonsoon-key-triggers-bagga_1079947.html?utm_source=ref_article

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