Mumbai: The president of investment banker Prime Securities, N. Jayakumar, speaks in an interview about the current state of the economy and the markets, both Indian and global. Edited excerpts:
Can you now say that the worst is over?
The good thing is that we are seeing these kinds of moves; we keep seeing these kinds of money flows. That is the good news, and I think that the worst is behind us. I think the world has underestimated its own ability to handle this kind of turbulence.
Do you still hear scepticism? Because at 12,000 (points on the Bombay Stock Exchange’s Sensex), there was an abundance of scepticism, but at 15,000, too, you hear a lot of people not being invested, not interested in investing and far too cautious.
The kind of attention we pay to the results of the European banks and financial institutions and other companies in similar spaces gives me the feeling that the people are holding on to the crutches for not investing. There is not one person who, on a table-thumping basis, will say: “Buy now, because you have a new high waiting for you in the next 12 months.”
...People, in their heart of hearts believe that their portfolio should do well, but are unwilling to commit to it. You take the most successful HNIs (high net-worth individuals)—no prizes for guessing the names of those who are cautious before they are bullish.
What do you sense from the global guys? Is it true that the HNIs are very sceptical because of the global factors, but the global guys are less cautious? Or are they doubly cautious?
No. I think when we talk about the global guys, we have got to differentiate between those who are India-dedicated and those who have the ability to allocate capital which might be the multi-strategy, multi-asset category. If you take the India-specific guys, most of them are running portfolios that are between one-fourth and one-fifth of what they were running at the peaks and, therefore, are not able to back what they believe with an equal measure in terms of money.
That is because they sold off or because the asset values came down...
Both. Redemptions hit them more than anything else. People redeemed early and therefore got away with less damage than later, or people just got hit in the market because they had the ability.
The worst hit, in my opinion, have been people with long lock-up money where because there was no pressure to redeem them, they held on to the investments and those investments in any case have gone down 70-80%.
Yes, there has been a bounce-back in the markets but the amount of money that has got sucked into the system as a result of creeping acquisitions, etc., a lot of those stocks have been permanently placed to the promoters. So coming back to the two categories I mentioned, I think the India-dedicated people are in the sense naturally oriented towards India but have much less firing power than they had earlier, significantly lower. Those with multi-strategies are looking at this because of natural diversification.
I think people who looked at India as just one more country are today actually allocating capital.
...Just to give you a perspective, the Hong Kong markets, since our election date, are up 21%, while we are up 26%. So have we done something spectacular for people to run away? So I don’t think that people are worried about the undue moves which have happened. China continues to make new 52-week highs and does it without any great kind of moves, but good consolidating moves, and I think India is doing much the same.
So while we are caught up in a 4,000-4,600 range (on the National Stock Exchange’s Nifty), I think the big picture is slightly different. I...genuinely think that we will make a new high, and with some conviction at that, within one year.
So you’re saying that in the next few weeks, 4,700 will be taken out?
Difficult to make that kind of a micro adjustment. It possibly could. To me, 4,700 is nothing but a speed breaker on a highway. If you overcome that, great.
Where do you see the floor for the market?
For the moment, I think 4,000 on the Nifty, give or take 50 points. That probably translates into 13,000 for the Sensex, (which) may well turn out to be a very aggressive floor.