Systemic shocks notwithstanding, our market fundamentals are strong.

With markets swinging wildly, what is your advice to retail investors?

The markets are exhibiting huge volatility in recent times. It should be noted that when the markets had surged across 15K, there was overenthusiasm and we had swung a tad above the fair valuations. This is not to say that we had to undergo a correction, but we would have been susceptible to any systemic or earnings shocks… And the same happened.

It was the US subprime jitters which sent shivers down the global financial system and, consequently, impacted us also. Our call is that systemic shocks notwithstanding, our market fundamentals are strong and the same is being reinforced by the earning growth and economic buoyancy.

Though there are short-term impediments such as rising interest rates, political uncertainty etc… as long as our fundaments are not impacted negatively in a substantial manner, the markets are safe and worthy of seeking exposure into. Thus, retail investors should enter on a decline… but the caveat… don’t leverage and don’t stray away from fundamentals!!

There is a lot of worry about hedge funds pulling out of India. What is the quantum of hedge funds invested in India and how could that be impacted due to external worries?

Hedge fund exposure can only be estimated and street estimates range from 15-70 per cent of last years’ inflows.. the truth could be somewhere in between. The traditional US type hedge fund would find it unattractive to operate in India in the quantum they desire due to comparatively low liquidity and depth, save for few stocks. However, the pressure on their borrowing and investors could force them to encash some of their profitable investments… and in case the same happens to be Indian stock market pivotals, the pressure on markets could be intense.

Do you see any change in mood of high net worth (wealthy) investors after the recent upheaval?

HNIs are distinctly better off than retail investors and swing both ways — both bullish and bearish. They do not account for as much of the trading as retail investors. So while in some stocks they may rule the roost, by broad market standards they do not have much of an impact, as pivotals is generally not the HNI’s game.

What are all the key factors that could determine the market movement in immediate term?

In the short term, it could be political uncertainty and happenings… but in medium term…. It is fundamentals, which are extremely strong now.

Recently, you have conducted an investors’ conference? How was the response?

We covered over two dozen companies and the same was attended by over five dozen institutional investors. The response from institutional investors was good. But it was far better from private equity funds.

What was the mood of the industry captains?

Optimism tinged with caution. But many of the smaller company managements are exhibiting tenacity and capability in handling adversity and surprises such as a swinging rupee and rising interest rates surprisingly well. They more than match the management of large conglomerates.

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