Mumbai: With no evidence that stock markets have peaked, Ramesh Damani, member of the Bombay Stock Exchange, said in an interview that the bull rally is likely to continue. Edited excerpts:
Are you confused as 2010 starts off or can you make a definitive prediction?
Analysing markets: BSE member Ramesh Damani.
It seems sunny skies ahead. I think 2009 was a year of huge angst for me; the market fell and then rallied very sharply. But from everything that we read, whether it’s technical or fundamental or company analysis, it strongly suggests that India continues on its bull market. We have reason to be optimistic looking ahead. I don’t mean in terms of the indices but I mean generally in terms of the economy doing well, individual companies doing well. I think one should have a good positive year for the market.
What are the chances that this is the peak?
It doesn’t seem like one. I think it’s very easy to tell when the market is at a crescendo. You will see a hugely leveraged build up in F&O (futures and options) position.
There is no evidence right now that I can foresee that we are at the top of the crescendo, edge of a tidal wave. The market in fact looks extremely healthy once you look at the screen, once you look at the outstanding position, once you look at advance-decline, or you look at the chart formations or you look at projected earnings down the road. So while we are all aware that anything can happen in a financial market, there is no evidence to suggest that the market is at the top.
Would you call a new high in 2010?
My sense is that we will test the old highs, tease with it and flirt with it. We probably won’t make a decisive break above 21,000 for the reasons I have mentioned. My sense is we will not make a decisive new high, but even if we get to the old high that is a good 15-20% move from these levels. Individual stocks will do far better than that.
The first macro event that we have to deal with is RBI policy. Are those concerns overdone from an equity markets point of view or is that genuinely a tipping point?
What the market will look for is the Union budget coming up. The central piece of the budget will be the PSU (public sector units) programme. It will be a huge money making opportunity once there is clarity achieved on disinvestment.
For the primary market, which do you think will happen first: will there be a recalibration in terms of prices or will retail and generally the public start getting sucked into the primary market issuances?
I have a strong opinion on that. The way the primary market has been structured in the last few years, is that these real ultra-HNIs (high net-worth individuals) come in, put in Rs100 of their own money, leverage it up 20 times, then pay 18% interest and expect to make 20% on the first day. You don’t need people like that. Where in god’s good green earth did you get 20% return on day one and when it doesn’t happen, they call the issues bad. We need to bring in more genuine retail investors who are willing to hold for a period of time. The promoter should price it attractively, not necessarily huge price to nonsense ratio.
There will be huge issuances and government of India will be the number one issuer this year in 2010. It’s good that growing economy, we can absorb a lot of new paper now, savings are growing. So I think a buoyant primary market will help secondary market.