interview with Sheshadri Bharathan

Sheshadri Bharathan of Dawnay Day AV Financial Services said the market is inversely proportionate to international crude prices. So any drop in crude oil pries should augur well for the market, he said. "The rally for the last one-month was moving in a band of 10% up and down and so if the crude oil prices touch USD 100 per barrel, then we might see the Nifty moving in range of 4,650 to 4,700 coupled with a decline in inflationary trend."

 

Excerpts from CNBC-TV18's exclusive interview with Sheshadri Bharathan: 

Q: It is all about crude prices today at USD 108 per barrel and we have seen the markets giving thumbs up to that - do you think if we go to USD 100 per barrel levels or so, then markets are in for a sharp bounce back from these levels?

A: Yes. Markets are inversely proportionatal to international crude oil prices. India is heavily dependent on import of crude oil; the Import Bill is more than 54%. So, any drop in crude oil augurs well for the country, we might see a decline in the inflationary trend and this in turn would have a good impact on the stock markets as well. We see immediate results in the 10-year bond yields and the expectations with crude oil prices coming down. The inflationary trend might also decline and we see that in the 10-year bond yield prices. 

Q: How much would you give this rally because after all the reason why crude fell is because there is a global slowdown and demand destruction - so what percentage gains would you give this rally?

A: The rally for the last one-month was moving in a band of 10% up and down and so if the crude oil prices touch USD 100 per barrel, then we might see the market moving in range of 4,650 to 4,700 coupled with a decline in inflationary trend, which we would see on Thursday evening. 

So at this point of time, the biggest factor which would lead to rally in the market is crude oil prices coming down and a decline in the inflationary trend. 

Q: In anticipation to this rally where would you go long?

A: The interest rate sensitive sectors are seeing action today. As crude oil prices come and the ten-year yield comes down, we might see the rally in banking stocks and realty stocks continuing. 

Q: Could you comment on Ranbaxy and the whole pharma space because the space has been under a bit of pressure for the last few days?

A: We might see the EPS of Ranbaxy improving from here on and will see lot of gains in this stock in a year's time. 

Q: What would you advice traders to do? Wait for 4,400-4,600 and start buying or buy right away? Would you sell into that rally at 4,700?

A: Our advice to most of the traders is that as and when you are get profits, please take profits off the table. The Nifty is moving in a range and so if we are at an upper brand of the Nifty, then one should create positions in put options and when the markets come down, one should create positions in call options. That is what most of the traders are doing in this market. 

We have seen a lot of action in double-digit stocks; like Noida Toll Bridge or some of the stocks in this category. One sees a lot of momentum buying in these stocks.  

Q: What is your view on stocks like ONGC and Cairn - they are moving in different directions?

A: Cairn is a direct play on international oil prices. So, whenever international oil prices come down, Cairn would also see the effect and we might see selling in Cairn.

For ONGC there are other factors also coming into play like their bid for Imperial in UK; they have subsidy burden of around Rs 48,000 crore and so whenever oil prices come down, their subsidy burden decreases because of which we might see buying in ONGC stock today.Fran Lebowitz  - "Life is something to do when you can't get to sleep."