Ramesh S Damani, a member of BSE and a 30-year veteran of stock markets, expects 2014 to be a better year for stock markets than 2013 in which the Sensex gained nearly 9 per cent. In an interview with NDTV Profit, Mr Damani says there are "signs which suggests perhaps we are in early stages of a new bull market".
Ramesh S Damani, a member of BSE and a 30-year veteran of stock markets, expects 2014 to be a better year for stock markets than 2013 in which the Sensex gained nearly 9 per cent. In an interview with NDTV Profit, Mr Damani says there are "signs which suggests perhaps we are in early stages of a new bull market".
Here is edited transcript of the interview:
On market outlook for 2014
2014 promises to be a better year for Indian equities than 2013 was. There are signs which suggest perhaps we are in early stages of a new bull market in 2014. If you look at how markets shrugged off the bad news, B group which has not participated in five years is moving, these are typical of the early stages of bull market.
There is hope that election results will be positive for the market. Whether it's true or not will only be known in December 2014. I am operating my portfolio on assumption that bull market has begun and it has ways to go.
On midcap and smallcap stocks
Fact is for the last five years only select few stocks were moving and everyone was saying that it is not a bull market as only 20 stocks are moving. Now, index remains in the range but cash is moving, which is typical of the early stages of bull market, where actually the so-called 'cats and dogs' move.
In early stages of bull market, the 'cats and dogs' are so beaten down that some amount of fresh buy almost doubles and triples these stocks.
The market already had leadership in terms of technology and pharma. These are extremely strong sectors of the market and kind of earnings that is coming out and the kind of expectations that analysts have suggested that these stocks will be re-rated over a period of time. So I want to look at the glass as half full.
Things can go wrong but typically forces that unleash the markets are placed. I think the force this time is that market is looking to a new election suggest that bull market will run course.
On election impact on market
Broadly speaking the roof of maneuvering is so limited for any government which comes in power that they would have to follow progressive economic policies. Whichever government comes to power they will do what's right for economy in terms of economic progress forward. We will get away hopefully from the policy paralysis environment that prevailed in Delhi for last some years.
Are markets betting on a strong economic recovery?
Bear markets have a cycle, everything gets trapped into a price at a particular point of time and then they start moving up. News typically will get better 3-9 months down the road, markets tend to be looking ahead not backward. Market is looking to at an economic recovery, at a better investment cycle; it is looking exports made more competitive because of depreciating rupee. It seems pretty hard to believe but typically bull market starts from depth of a depression.
Has AAP's victory changed equation for BJP in 2014 election?
The equation has changed but some of it is for better. However the Indian electorate in the past has shown discrimination in between the state and national elections.
It is premature to say that as AAP won in Delhi it will win across the country. And if you look at economic portfolio of AAP, you don't want to use SMSs and public forum as a substitute or thought for what this country needs.
What we need is an open market economy. We don't want to job FDI in retail because you are actually banning jobs, investment and progress and this what AAP's economic plank suggest.
We should look at Arvind Kejriwal's policies; the policies which have come out so far are not in best interest of rapid GDP growth. While on the other hand his planks against corruption, his planks about honesty in government are to be saluted.
Would market be unhappy if there is strong showing of AAP in elections?
Yes, I would think so. A populist government is no substitute for economic policy. You can't let electorate decide what economic policy should be. They will all vote for what is in their best interest. A national government has to look at the overall policy. AAP is not moving in correct way in terms of broad economic policy.
What does Narendra Modi represent to the market?
More than anything else they believe that he will do what he has done in Gujarat; files will move, decision will be taken, the government will not be paralysed. Whether he will be able to do it in same speed as in Gujarat that remains a question.
But market clearly is in a honeymoon phase and believes that policy paralysis that had plagued the economy for last some years perhaps will change if a Modi-led government comes to power.
Is a pre-election rally on the cards?
Typically, the pre-election period has not been depressing in India for last 15-20 years; markets have done pretty well. Market knows that there may be a different coalition coming up. So there is no need to get out right now and come back at some point of time. You just need to ride the swing.
Will more stocks participate in the rally?
Since October it is a very broad based rally. I would not categorise market as very narrow, the rally is fairly broad based, and good quality companies are doing well. There is no reason to be disappointed with market's performance whether in headline stocks or in broader market.
Bet is running typically 3 to 1 in favour of advances to decline that is as inclusive as it gets. We hope it could get 4 to 1, but 3-1/2-1 is good sign. It means the days are sunny and the outlook is good.
On global markets
In American markets you get high quality companies like Coca-Cola, Cisco which are Dow component stocks and yields about 2.8%-3%. The market there still has ways to run. US market will continue to provide leadership to global market space.
On his stock picks
Tech and pharma will continue to show leadership in market. Consumer goods section is going down right now, we are fully invested in them but not putting any new money. In terms of new themes, I have suggested media in the past and it continues to look good. We have also added nascent sectors of e-commerce, logistics in the end of 2013-14. India still may be two years away from boom in online space because of restrictions but it is coming.
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