IPOs, tax code to deter Sensex from crossing 21,0006 min read . Updated: 07 Dec 2009, 11:39 PM IST
IPOs, tax code to deter Sensex from crossing 21,000
IPOs, tax code to deter Sensex from crossing 21,000
Bombay Stock Exchange (BSE) member Ramesh Damani sees the markets correcting in the short and medium terms although he is bullish about the long-term outlook. “I do not see the Sensex crossing 21,000 in the near term," he said in an interview, citing new share sales as one of the obstacles to the BSE benchmark scaling new highs. Edited excerpts:
Would you say that Santa (Claus) has already done what he could for the market before 25 December and he is struggling to put in any more of an effort going into December?
I think we are now long-term believers in something special going on in India and while there would be very volatile corrections, there will be very serious corrections on the way. I think the way in which the market has rebounded from its lows last year suggests that there is something—you cannot miss the forest for the trees and if you tend to look at the markets in one month or three month segment, you would probably tend to miss the forest for the trees. I think there is a good long-term story here and the trick is the guy who is going to win will be holding the bag perhaps in the next few years—not the one who keeps passing the bag around.
The past few weeks though have shown neither a very sharp correction or at least not deeper than 5-7% and not a huge rebound. It (Nifty) stops at around 5,100 levels. What is the better way to read that? Is it exertion or is the market just marking time?
I would say the latter. If you look at the breadth of the market; you see extremely good breadth volume; there is a leadership in the market segment, so I would say the markets have had a huge rise, have just digested some of the gains and will probably mark time again now till the quarterly results come out in January. But if you look at some raw data, they all suggest that the market is headed higher and at some point we will even break away, in my opinion, from the Western markets; so we will even see some situations of the Dow goes down but the Sensex will go up because the underpinning was very strong—we have a world that’s not growing, and India is growing at 7.9%
In the interim, while the market is marking time, would you shift focus to the midcap space?
There are some extraordinary bargains available—tri-factor values as they are called —good management, good businesses and good valuation. All three are available, so certainly this is a good time for stock pickers like me. Also what I am anxiously looking forward to in 2010 is the government announcement of its divestment programme. If one goes back and read the history of the last 10 years, one of the great money making opportunities was, as Peter Lynch put it, “When the queen sold her silver." You got some great values in the PSU (public sector undertaking) stocks in years 2002-03. From those bases, they were up 50 times or 75 times or sometimes even 100 times. The government’s decision—(Manmohan) Singh’s decision—that 50 profitable PSUs will be listed in year 2010 has been salivating. These are some great opportunities, go out, pick stocks and find some great companies. There is some wonderful basket of stock that will come in and be listed. There are some good initial public offerings (IPOs) coming forth in the next few months. So, it’s a delight to be looking at the Indian market and trying to pick bargains.
On that subject of the glut of the primary paper, do you sense that’s keeping the secondary market a bit reined in?
I would not use the word subdued. I do not think it’s a fair adjective to describe the state of the market. Markets had almost a breathtaking run and it’s been now subdued for a few weeks, which is fine. Markets will go through the periods of consolidation, build a base before they go further ahead. In terms of the broader question that you asked—can the Sensex take out 21,000? My view is that it will take time. It will be a bit later rather than sooner and one of the reasons would be because of the huge glut of issues coming into the primary market, changes in the tax code, and just (that) these are very stubborn technical levels. The market spends lot of time before it takes them out. So, if you ask me on a broader sense can the index take out 21,000 in the next six months or so, I would be dubious about the possibility. But I have no reason to complain about the markets. They are trading broadly that you can buy; you can sell almost any quantity that you want, the markets are liquid, good results are being rewarded. It’s a happy time to be in the Indian financial markets.
Would you say that in the entire year of 2010 it’s likely that we see a new high—not six-months but 12 months?
I would say what I said last time—we might test it, we might tease it, we might flirt with it—but are we going to make decisive break over 21,000? Somehow I do not think so.
How are you reading the global turf into 2010? Do you think things will hold up or the global event flow will lead some of these sharp corrections that you were talking about?
It’s hard to be extraordinarily bullish on the Dow at this point. But if you are an India bull, the call has to be that India will break away from the pack. There is enough ground momentum now, whether it’s auto sales, cement despatches, consumer durables, that we are now breaking away from the pack. If we can see another string of this gross domestic product (GDP) numbers come through, if the government does good job with the PSU disinvestment, you can make a forceful case that India is going to break away from the pack and we will not be overburdened by what happens in the West.
To tease or flirt with our lifetime high is still a long way from 17,000. You sense that much ground will get covered in 2010 because that’s a meaningful return to have for the next year?
Yes, it is meaningful, I do not want to disrespect that— 17,000 to 21,000 is a very meaningful amount. People talk loosely if it’s going 25,000-30,000, but that’s almost double from these prices. But it has a chance to cover it. There is enough underlying momentum that the market would cover that area.
How is gold looking going into 2010? Is it overbought, would you take some money off here or just keep riding longs in gold?
I would ride long in gold. I think gold is in a new bull market. My first priority is that you should use that as insurance, not as an investment; it’s not a good investment idea at all. You vote against central banks, against them devaluing the currency, all the time, so use that as insurance.