Friends,
I am pasting here an interview which I read at Moneycontrol.com
Hope readers will get enlightened by it while reading it and trying to read the finer lines which I had highlighted......

Vallabh Bhansali, Chairman, Enam Financial believes that the massive sell-off seen is mainly due to panic and not due to fundamentals. He advises investors not to panic, wait on the sidelines, and not sell unless they have to. "This is not a regular market, but an auction market and people must understand this clearly. Today, those who are desperate for cash because they fear redemption or have redemptions are forced to sell. Those who do not have any reason to raise cash should not try and value their stocks based on the prices that they are seeing today."

Bhansali said the world is going into recession and demand is shrinking but stock prices have shrunken a lot further. "People are hurting themselves by panicking beyond reason whether it is fixed maturity plans, stocks, or other asset classes."
Here is a verbatim transcript of the exclusive interview with Vallabh Bhansali on CNBC-TV18. Also watch the accompanying video.
Q: In your career have you seen a day like this, a more than 1000 points drop on the Sensex with absolutely no big evident trigger?

A: I have not seen anything like this. I have been in the ring when the market fell 15-20% but there was never as much panic as there has been today. Normally we would have the circuit filter but because of technical reasons, the filter is higher. Fortunately, the market did not close.

This is unprecedented because this has been accompanied by bloodshed around the world, this is terrible.

Q: What you ascribe this to – everyone has been broadly swiping this under the global situation but there really was no key trigger today. We have been through worst situations when it comes to the credit crunch in the past two-four weeks, is it just an excess of fear in the system?

A: There are two aspects to this; one is this is not a regular market. This is an auction market and people must understand this very clearly. Today those who are desperate for cash because they fear redemption or have redemptions are forced to sell. Those who do not have any reason to raise cash should not try and value their stocks based on the prices that they are seeing today. This is very important because someone who is desperate for a glass of water will take off his diamond ring and exchange it for water. Those who do not have to should not look at that as any establishment of price either of that water or for that drink.

Secondly, to the extent that the stock exchange is a leading indicator of things to come, the market is probably scaling down earnings forecast for 2009 and even 2010. But the most important thing for the investors to see is the prices. Prices of 80% of the stocks are down at least 70%, 60% of the stocks are down 80% from their peak. 1930 has already been built into this price. People are imagining 1930; no one sane is alive today to tell us about what exactly happened in 1930. ( This I have been writing many times here that no one knows what happened in 1930 and the situtaion was different) India has no case to experience 1930. So except for those people who have to sell under compulsions should just wait on the sidelines and interpret the prices in any manner.

Q: It was a very brave word, but when you are sitting there watching your portfolio decline by value like today it did by 30-50% how can you not – and the news seems to be only getting worse. There is a lot of rumour mongering on the mutual fund side and we have heard all kinds of regulatory noises about the FMP (fixed maturity plan) system and how they want more disclosures, how that could potentially be ridiculous exposure of FMP mutual funds to the real estate market, how long is this going to last? Where do you stop being fearful?

A: There is something very strange and sad that is happening — those who took a twelve month call and bought into FMPs are now trying to review their portfolio on a 15 day or a one month basis. You will create a run on any bank if you try and break your fixed deposit and demand money, I think some of that is happening.

Mutual fund schemes had exposures to real estate companies and some of them – we heard about one company defaulting yesterday there would be some panic. But I wish mutual fund industry would come out and put up a white paper on what exactly is happening because that would probably staunch the panic lot more then letting people imagine. I think while there is no denying whether the world is going into recession and there is demand shrinking but the prices have shrunken lot further, people are hurting themselves by panicking beyond the reason whether it is FMPs whether it is stocks or whether it is other asset classes.

Q: What is your assessment of how badly of the mutual fund industry especially the FMP portion is when it comes to its exposure to real estate and how much worse could the whole redemption pressure get and therefore what kind of collateral impact it could have on the markets?

A: Promoters, the government and institutions hold 80-85% of the total holdings, a very small portion is held by retail at large and that is probably a few USD 100 billion. The same is the case with the amount of assets held in the mutual funds by retail investors and that would be a few thousand crores.

So if I were to put this into perspective; of the total wealth of the country, this is not a large amount. Today we have the Finance Minister (FM) who is monitoring this situation twenty-four hours, he has virtually become an anchor person on media channels, he is assuring people everyday – given the situation, I think the moment there is something that can be tackled I am sure the Reserve Bank of India (RBI) and the ministry will tackle it very adequately.

Q: Are you saying that you are not worried about the FMP and the larger mutual fund exposure to the real estate industry and you do not think it will have a dramatic impact on the markets if things go worsen from here onwards?

A: Whole point is stampede is caused not by causes as much as by panic. Today you are seeing a stampede. What I am urging the ministry and the mutual fund industry particularly is to come out openly and explain that and then we can have a solution. Unfortunately, today that is not happening. I am not fully aware of the reason why that is not happening but clearly if some of the banks in Europe, particularly, went to the government and said they had trouble they would be nationalized, get protection and things could be handled a lot better. Depositors would then not have panic.

There has been trouble; but my guess is that of the total assets held under the FMP schemes, the amount that could be exposed to real estate could be really in trouble and cannot be that large as to cause a panic all around. That will damage our economy unnecessarily.

Q: We do have news from Sebi that it has asked for more disclosures on FMP allocation, so hopefully that will help straighten out that system, but while talking about regulatory action we also saw Sebi come out this week and clamp down on practice of overseas lending of stocks that were underlying assets to P-notes. Do you in your assessment think that will help reduce the short positions in this market and therefore help shore the market up?

A: Today given the enormity of the challenge that any regulator is facing. One is not sure as to what results one would get from a particular action. But if one realizes that in these troubled waters, you cannot allow people who are sitting on the sidelines to fish. I think it’s absolutely alright to take whatever action based on data that any regulator would have. We have seen that around the world.

The whole point is not to come in the way of short seller, when you have a regular market or don’t have a regular market. I don’t think one can take a classical view about it. I am the last person who would ever say stop the short-seller but today you are not seeing a regular market and therefore if you had to take emergency action based on data, based on transparency as to when these things will reverse, under what conditions, I am not so averse to considering such action.

Q: The Monetary Policy that took place was a completely inactive or non-action policy as many are calling it. Were you disappointed, do you think either this stance of the RBI could have been more reassuring towards the current market situation or should they have taken more action when it comes to either liquidity measures or reducing interest rates?

A: The RBI has almost made it a habit to come out with the monetary policy a few days or a week before the actual date. So I think lot of action took place already. I did not expect any particular action. I think today’s (October 24, 2008) meltdown was more in response to what was happening in Asia and early opening of Europe than monetary policy.

So I think the RBI did quite a lot in the last few days or a week or so. I would urge the Sebi (Securities and Exchange Board of India) to temporarily lift all limits on promoter holdings whether it is buyback, whether it is open offers, whether it is creeping up position for the next two-three months. I think companies and the shareholders are bleeding because of this panic selling. What actually is happening is that of the total hedge fund industry, which is of USD 2.5 trillion; exposure to India of all FIIs (Foreign Institutional Investors) hedge funds put together is somewhere between USD 50-60 billion. Out of this USD 5-6 billion of panic selling can ruin this market for a long time to come. So I think today those promoters who have cash and who want to buy in the market should be permitted to do that. This is something that is within Sebi’s powers and I would urge it to take drastic action on this front.(Does this mean Vallabh Bhansali has blasted SEBI or Fin Ministry? he need not write this ? or should come out and appreciate SEBI or Fin Min when these steps are taken?)

Q: Do you think that will help provide some sort of support to many of these stocks that are falling especially blue-chip stocks because many of the promoters we hear also are either out of cash and may have had to pledge their previous shares to be able to raise money to either subscribe to some sort of previously subscribe to warrants or things like that or many promoters do not want to buy because everyday prices are going down by 10-30%?

A: We are doing a number of buyback offers and going to several clients to tell them to come and support their shares if the creeping limits are open.

Today the stocks are available at 30-40% of replacement cost. I can assure you we will continue to breed children, we will marry, build homes, educate and the economy will be absolutely normal, we will grow at at least 5-6% for next two years. Our stocks are cheap based on any valuation and people must understand that.

Q: Do you expect any kind of direct government intervention or even indirect government intervention in these markets and any kind of Sovereign fund that the government might set up to help shore up levels in this market or to create some sort of reassurance- I am talking in vague terms because it is a vague idea but you think it could extend to reality?A: I don’t think it’s impossible. This country has shown the capability to pledge its gold, to swim differently from rest of the world in Asian crisis, so I would not rule that out.

But what the government can do more easily is to give relief on dividend distribution tax, on STT, reinterpret the capital gains tax, so at least those long-term investors who were driven out by short-term speculation in the last November-December-January period, those strong hands will be strengthened by those measures.(Another case in point.....)

Q: What form could this sovereign or market intervention fund take?

A: It could be done in two methods. Hong Kong sometime back created a USD 16 billion fund to stem the rot. This was during the Asian crisis. They came forward to do that and made a huge amount of money doing that. So, you could say that you are going to buy certain good stocks. The financial sector, for example, is one good place to begin and they could do that.
They could also put a floor on the Sensex or Nifty. They say alright here we have a huge position very similar to what Warren Buffet did. He bought 2018 Dow Jones saying that look I take a bet that the Dow Jones will not go below that, so it requires some imagination because it is beyond current regulations. One doesn't have to worry about regulations, but given our exchange reserve, the time is to use all of that.

Q: How long is this pain going to last? Where do you think this market could potentially find its bottom?

A: The USD 2 billion or USD 3 billion of stocks held by the hedge funds are loosing value much faster than the Sensex. Some of the stocks are falling about 20% to 25% and there is a huge amount of capitulation. Some of these hedge funds may go bankrupt or they will have sold out without damaging the overall market. Over a period these hedge funds will be bailed out or they will go to some different route in the world, one doesn’t know.

A lot of this troubled is borrowed and it is not home grown. We are very close on putting a cap on all these problems it’s a matter of few weeks according to me and not a few months that you are going to see the world come to some kind of order that all the regulatory affairs will be ahead of the curve, they started late but they are constantly pressing ahead to get the curve of the problem and I hope that in a few weeks we will be ahead of the curve.

Q: Fundamentally the economic data across the world is looking like it will at take least 6-8-12 months for there to be any positive news, is that how long it will take for our markets also to find a bottom and stabilize?

A: Stock market is a leading factor; which means it discounts things way before those causes appear.( That I have reiterated many times here) You will see economic data become adverse for several months but it is all got built into prices, when 80% of the stocks are down its already discounted in the prices. Investors often forgot to look at prices. They looked for justifications when the index was at 20,000 and yet again trying to look for justification when the index is around 8,000. Please don’t look for justifications and just look at the prices. I could give you hundreds of examples that the stocks have already discounted all the trouble that will get recorded over the next few months is all done.

My Commnets:

Ravi alias Deepak alias Shankar Sharma! ,I hope either you are Shankar Sharma himself as I see no reason for you to get perturbed when I write anything against anyone.Remember there are many blogs where these chartist and analyst are lamblasted like anything.

How SS feels is not the readers business and tell me what I should do and explain me what I need to do.Let SS himself come here and tell me what he wants from me and whether I should appreciate him or not?Why you become the judge?It is just like you yourself is SS and asking for that! Is it so?Shankar Sharma visiting my site?That is great...for me......Lol.....

I have kept my blog open for readers to write commnets where many blog has no such tabs but that doesn't mean they become impolite to me.....If you do not like me or say hate me.....please stop reading me, that's all......