Friends,
I am just pasting the interview given by Vallabh Bhansali the CM and partner of Enam Sec given couple of days back.....

Read on:

Q: What’s your sense, of the impact this kind of an interest rate hike would have on growth and equities?

Bhansali: The market has spoken, but I think the market will start at some point of time, I hope very soon, diverging on the monetary economy or the monetary management, because fundamentally the market will have its own concerns and its own subsides. I think we are reaching a point where the upsides, given the price levels, will start overwhelming the downsides. So that’s how I see without getting into making a comment on what step this is.

Q: The fear is also that perhaps the market and several analysts are not quite getting a handle of how much this tightening is going to go towards; from April to now we have moved 150 bps on the CRR and 125 on the repo side. People are talking about inflation going close to 15%-17%, is that kind of tightening rate scenario and that kind of an inflation picture adequately factored in you think?

Bhansali: I think so; I clearly think that from a market point of view we shouldn’t get worried about this. The need to strengthen the rupee is quite obvious. So if I were to look at the upside of the moves by the government and the RBI, it will strengthen that case.
Also, the equity markets have the first reaction to hardening of interest rates. But the day after markets factor it in and move on. The euphoria is being buried and killed. So in the real economy, the governor said and so did a lot of other commentators, more and more people are veering around to the view that instead of a 7% growth, we will probably be at 8% or a little higher. So at the periphery, these interest rate moves will affect the economy but the core economy will continue to move as it was because India is in still the credit expansion mode or the credit part of the economy is not as large as it is in some of the western world where a move like this can have potentially a much greater effect.
So from my point of view, having done the first move, the marginal moves will have lesser and lesser impact. Though coming as it does at lower levels of the market the pain seems to be unbearable, but if you look at the totality of the impact at the margins, this is not going to effect much and therefore I am going to ask my people to research stocks with more vigour and find buying opportunities over the next 12 months.


Q: Does it worry you that these kind of interest rate spikes could hurt equities in more ways than one?

Bhansali: That would be the case definitely in the short term and that’s why I said 12 months to 18 months as this macro adjustment is made in the world and in a derivative manner in India. Equity markets will not be spared, but that’s where the opportunity comes and men and boys have started to separate seriously. Today when we see all bank stocks fall, I think it's clearly an opportunity. In bank results, different management responses from different institutions - that’s what equity markets are all about. So in the aggregate at the Index level, what you say may be right, but at the company level, serious opportunities will emerge. That’s what I think is exciting.

Q: We were talking to Pradip Baijal, Former Secretary of the Department of Disinvestment, before you came on and he was talking about whether and in what shape disinvestment might start again. Do you think we have a serious prospect of that seeing that over the next six-eight months?

Bhansali: To the extent that proposals don’t have to go to the parliament and what is well established and recognised within the departmental authority, I think there is some chance that divestments will happen. Some of them were in the pipeline and we have some cases where prospectus has been filed with SEBI. I think there is serious chance that some of that will happen.

Q: The market has been closely tracking crude prices and ever since this cool off, one opinion that’s coming around is there is almost a purging of asset classes, including crude now. How do you read the developments on the commodity front these past six-seven months?

Bhansali: I think commodities were going through a long-term cycle starting probably sometime towards ’98 -’99 and so we have had ten years of continuous uptrend in commodities. As the world slows down, I think the commodity cycle will also slow down and a lot of people are now convinced that oil will fall below USD 100. So I am also of the view that over the next 12-18 months, commodities will have peaked. I think the big opportunity to move out of equities and into commodity was probably in 2007. But increasingly now, the benefit of being in an equities will outshine the benefit of being in commodities over a two-three years perspective. In the short-term it’s difficult to make a call and I do not want to make any.


Q: Because you have seen many cycles with the market, just to look back in history, and in a similar situation in terms of macro developments and what was happening with the market?

Bhansali: If we put in to perspective from an equity market point of view, all kinds of bad news have hit us - we are facing an election, we had a close call on the government, we had bomb blasts, and we had oil prices go up. We had so much of bad news and macro worries, but that’s when the equity market opportunities start to take shape unknown in a prison cell somewhere and some new avatar is being born. So this is a nadir point and nobody can call the bottom of the market.
But we are clearly forming a bottom in the market and you can have some developments which bring in a sharp reactions but that’s about it. Sentiment is near the bottom of the cycle and a lot of stocks that are available at un-researched pricing levels and from an investor point of view, this is where one has to start looking at things.


My comments:
I have highlighted in red and blue words.......read that properly and try to understand what he says.....
Enam Sec is decades old broking firm and started almost when I entered the market in 1985....
It use to have big name Viz: Great Manu Manek and Nemish Shah.....
Vallabh Bhansali is the brother of Late Manu Manek and Vallabh Bhansali himself is a great stock picker not to talk of Nemish Shah.....