Mumbai: The president and chief executive officer of New Vernon Capital, Arshad Zakaria says the Sensex, the Bombay Stock Exchange (BSE) benchmark, is unlikely to go back to the 8,000 levels. He is looking to buy Indian shares on dips. Edited excerpts:
Efficient management: New Vernon Capital’s Arshad Zakaria says the Indian companies will focus on both the revenue as well as the cost side.
Has the utter sense of pessimism in the markets gone away, or do you still sense a lot of pessimism?
I think there is a real wait-and-see attitude and there is a lot of scepticism in the market, and I think there are probably two-three camps. There is one camp that would say that this is just a bear market rally and they tend to be incredibly sharp.
This may be a little sharper than most, but it is not yet clear that it is a bear market rally and I think there is another camp, which probably says (that) the valuations at the absolute lows that we had got to reflected a depression or a systemic risk.
The probability of that has decreased significantly, so some adjustment was reasonable...and a very small camp is saying that we are back in a bull market...
Do you think that the lows we saw in March, if not October, will be retested?
It is always difficult to call the bottom, but in my view, because you had the systemic risks already priced in and there is (a) massive amount of capital-raising, unless you get a big shock to the system, I think those levels should remain fine, and you will have a correction but it is not going to be to the extent that we had earlier.
So 8,000 for the Sensex is the low?
Again, as I said, it is difficult to call the bottom... I would say that the probability is high that even if we have (a) correction (the Sensex) may settle above that.
Do you believe that we have some kind of trough with earnings in India?
...I think you have two advantages in India. One is that you do have decent positive GDP (gross domestic product) growth and it has been probably a little better than all of us thought...and the second aspect is that the Indian managements in general are fairly efficient and so they will focus on both the revenue as well as the cost side.
So my guess is that you have a chance...for earnings to surprise you.
Have you trimmed positions after this big rally?
We have trimmed a little bit, and again, if we are looking on a long-term basis, we will take a little bit off. But in general, as there are dips, we will effectively add to some of these positions...
In general, I think, the theme on India is reasonably bullish and I guess, assuming if we don’t get some of those events that we have talked about, you should use some of these corrections as buying opportunities.
I think you have to trim at certain times because the markets do get into a phase where you get a lot of euphoria and you just want to be careful.