In an interview with ET Now, Ramesh Damani, Member, BSE, gives his views on the global economies and markets as well as his expectations from the Indian market in 2013. Excerpts:
What is in store for us for 2013? In 2012, the Indian markets have appreciated by 25% plus. For the next year, do you think we could be staring at similar gains?
The timings are good. Despite the large amount of pessimism around, you are going to see interest rates come down and I am of the minority view that it will happen as early as tomorrow. Commodity and oil prices are going to come down, which will be positive developments. There is now actual traction on the reforms front. All indications point to the fact that we are in the early stages of a new bull market, which means that the indices are going to suddenly head higher.
You also track the US markets pretty closely. How big a risk is the deal on the fiscal cliff and if it is not going to go through, what does it mean for the markets like India?
Politicians are the same everywhere in the world. Whether it is in a mature democracy in America or elsewhere, they are going to come to a deal that they know they cannot afford. Republicans would want to do it before December 31st because if they do not, tax rates in America for capital gains or dividends will automatically go up since the Bush era taxes are to expire. While it seems very hard, there is still a chance that it will be done by December 31st. If not, maybe a week after that. So even the US market is shrugging off pretty much. The news from the fiscal cliff, as important as it is, I do not think the US politicians are being pretty short-sighted at this point, but I guess that is politics. I guess Winston Churchill once famously said that when Americans run out of options, they end up doing something sensible.
Since you always fairly use all these market maxims, a maxim which you were fairly using in 2011 was bad news and good price, they never come together. Now news is good, but is price still looking good?
Yes, I think so. The market has done extremely well for the last six months. Typically in the first stage of a bull market, you will find that the indices do not make rapid gains or they do not show headline news, but the internals of the market start changing. You will see a lot of stocks within the A group and the B group have already doubled and somewhere even tripled in the last six months to one year. So that suggests that prices are much higher than they were, say, six months back, but it also indicates that they are probably headed higher because from the vantage point that I am seeing, I see clear leadership in the market across various sectors like pharmaceuticals, cement and FMCG.
At this time, the markets will climb this wall of worry and so far, it seems to be behaving in a textbook fashion. The news gets better incrementally, but the mood remains negative. Retail investors have deserted the markets, but foreign investors have been a big buyer in the market and because there have been no significant IPOs other than the last month, there is no floating stock available as all that has been mopped up by the FIIs. Even a small bit of buying will move the prices, which is what we have seen happening and which is why I am bullish for the early part of January 2013.
If global economies recover, do you think that could challenge global liquidity? If the US economy recovers, China seems to be recovering, Europe is looking stabilised. The hallmark for Indian markets for the year 2012 has been global liquidity. What if because of global recovery that liquidity feature reverses?
I really do not know how to play that. You can say global liquidity caused India to move up, but then why did not China move up? Why was China till a week back at four-year low, down to the 2008 lows? So clearly global liquidity is now not an easy way to explain this. Money has been coming to India at least partially out of choice. It is very unfortunate that our domestic investors are net sellers in the market, but that will have to change. The demographics, the economic growth trajectory point that this country is going to have a retail-led bull market this time. It might start in two or three years’ time, but I am willing to pound the table and tell you that the small guy is going to get back in there and he is going to lead this bull market to much higher levels. Mathematically, I cannot see this market moving to new ranges without the retail investor coming in.
Credit: 17 DEC, 2012, 12.14PM IST, ET NOW.