In an Interview with ET Now, Sunil Singhania , Head-Equities, Reliance MF, gives his views on the markets and government action on power front. Excerpts:
ET Now: How do you feel at 5500 for the markets? Does it seem like Indian stocks could stall from here onwards, take a breather or is it time that investors should now consider taking profits or deploy more money?
Sunil Singhania: First of all, it definitely feels good when the markets are up because it benefits everyone involved whether it is investor or company and the economy as a whole. As far as taking profits out is concerned, that is more a trader's game. From our perspective, obviously this rally has been a very pleasant surprise, but having said that, we do believe that if things pan out in terms of the macroeconomic factors which are now getting in favour as also the steps which the government has been taking proactively, there definitely seems to be more legs from a longer-term perspective. I do not know about the trader's perspective, but from an investor's perspective, it makes sense to stay invested and there is no profit to be taken because almost everyone has missed out on this rally.
ET Now: So do you then believe that we are at an early stage of a structural bull run right now?
Sunil singhania: We are always in the midst of a structural bull run which started in 2003-2004. What we have seen in 2008-2009 and also in 2011 were roadblocks in the structural bull run. So, our view from a longer term perspective is that once a country enters a structural growth in terms of its economy, the growth continues for like 25-30 years. We have seen that in China, we have seen that in Singapore and we have seen lot of other countries. In India, the actual growth started in 2003. So from our perspective, the structural bull run for the economy's concern is already on for the last 8-9 years and what we saw over the last year or so and also in 2008-2009 were probably the roadblocks to that structural bull run. So I would not say that this is a new structural bull run in the markets which has started. Probably we had discounted too much of negatives. The markets have run up too fast you can say over the last 1-1.5 months, but again it is not something which you can say that either way that it is time to book profits or time to aggressively buy. They have to take things as it comes. Right now, there are clear signs of both macroeconomic factors coming in our favour as well as lot of impetus given by the government to again kick-start the economy which was showing signs of slowing down.
ET Now: I also want to put the spotlight on the power sector because for the first time in years we are seeing some serious policy intervention in a sector that has been begging for it really, the Prime Minister's Office intervening asking Coal India to sign long term agreements with private power producers, how do you read into this move and do you see this is just a kind of reform that the sector needed at this stage?
Sunil Singhania: We are very passionate and positive about the power sector as far as India is concerned. This is one sector where huge investments can be made. There is no problem as far as demand is concerned because we are a power-starved nation and if we need to grow at 8-8.5% for a foreseeable future, unless there is power for all, this growth is not going to be possible. So the developments which have happened on the power side are very welcome. They have been very proactive measures and the impact is there for everyone to see. One statement from the PMO office for the fuel security has caused stocks to appreciate 10-20%. Overall the market cap of the sector has gone up by like 20000-30000 crore over a matter of one day. And one good thing is that this time it is not a request, it is basically a direction that you have to do it. It will force Coal India to increase its production because once you sign an FSA and there is a deadline for it to be signed, they have to make sure that they are able to provide coal. Otherwise they undergo penalty and obviously being a listed company, they cannot afford to be short on that. The other positive thing is that the steps are only the first in the direction of many other steps which are possible. So we are already hearing an EGoM meeting on the UMPP which is scheduled in the next few days and that be followed by EGoM on the gas allocation policy. This clearly indicates that things are definitely working for the sector and the government realises that this is one sector where we have to as a nation do everything needed to ensure that the capacities which a lot of private as well as public sector companies are intending to establish, come on place and also ensure they are given all the support needed. Obviously there are some other reforms which are needed predominantly on the distribution side because that will take care of the SEBs, but these steps towards fuel security will go a long way in also easing the situation as far as availability of finance both equity and debt is concerned. Overall these are very positive steps and this only reinforces the fact that this is one sector where the government really is very serious about ensuring the capacity addition. From a market perspective, this is one sector which no long term investor in India can ignore.
ET Now: What about coal and gas shortage because that indeed is a bigger issue in itself? Do you think there is a need for the government to provide incentives to importers as well as private coal producers to tackle this situation because Coal India alone cannot really help rescue it?
Sunil Singhania: Yeah. Fuel security is an issue. The thing is that we are in a situation where the country has a lot of resources, whether it is on the coal side or on the oil side. What needs to be done is to ensure that these resources are efficiently and in a timely manner sort of exploited, so that they can be used for the development of the country. So whether it is Coal India or other coal producers, we have probably one of the largest reserves of coal in the world. We just need to push whether it is through incentives or whether it is through ensuring that the approvals are on time to ensure that this coal comes out in a timely manner. This FSA, which has been mandated by the PMO's office as far as Coal India is concerned, will ensure that the production of Coal India, which has been languishing over the last 2-3 years actually starts to move up and probably even the private sector companies were sitting on huge coal reserves. If a timeline is also enforced on them to exploit the reserves and to sort out all the pending small issues, which a few of these companies are facing. Probably this coal requirement at least will be taken care of. We will definitely need to import some coal. There is no doubt about it, but the good thing is that even on that front, Indian companies have gone ahead and ensured that they have significant stakes in overseas coal companies. There are a few issues there relating to Indonesian taxes and all, which again the government can play a proactive role and ensure that the resources, which Indian companies own abroad, can also be used for development of the power sector in India.
ET Now: Which of the sector funds are witnessing fresh inflows at current juncture?
Sunil Singhania: The speed of the rally has caught all the investors by surprise and the investors have not been able to participate afresh as far as fresh inflows are concerned. However, one good thing is that the retail investors over the last few years have matured. So even when things were a little bit challenging, we did not see outflows from mutual funds. So, long-term investors have benefited. The NAVs of most of the funds, a few of the sector funds like infrastructure, power and banking are up like 30-35% in the last 1-1.5 months. They are now only marginally lower than probably their all-time peaks. So the long-term investors have benefited. The investors who are waiting for a right opportunity have missed the last 15-20% upmove. However, for a long-term investor, that is nothing to be worried about. Our view would be that whenever you get an opportunity or whenever you share the optimism from a longer-term perspective or whenever there are a few triggers, which are definitely going to hit the market in the next few months, it is still not too late.
ET Now: Is it going to turn out with the budget as an event and can we expect the government to deliver this time around or do you think it is going to be a non-event as has been the case in the past as well when the market just reacts for one day and then moves on?
Sunil Singhania: Over the last 2-3 years, the budget is becoming less and less relevant from a market perspective because it is more now a statement on the overall broad macro economy rather than earlier when you had huge excise and customs duty and a lot of companies used to get impacted by reduction or increase in those. However this time, the finance minister obviously has a task at hand. It is a difficult budget to present. We are still as a country facing the problems of huge fiscal deficit. Definitely a problem on the current account deficit and also the finance minister needs resources through disinvestment and some other means to bridge this gap. The budget from a market perspective is again going to look more from a policy front going forward. Whether it is tackling of the subsidy burden or mentioning some steps, which in long term addresses these issues of subsidy as well as current account and the fiscal discipline, it is more going to be a policy statement, which is going to be awaited. But from a finance minister perspective, it is definitely a difficult budget to present.
ET Now: What's the Nifty base that you are working it considering you do feel that it is not going to be just a one-way rally up for the market this year and we may see pause or corrections as well in the near term? Is 4500 the clear base or do you think we could drift lower?
Sunil Singhania: What I can say is at the cost of repetition is that for a change now. We have investors who are looking at the minutest of minutest reaction to pump in huge sums of money. That would ensure that reactions if any are going to be swift and short. At least this view for the near term should hold. Again it is a very dynamic situation. We are going wrong almost on a daily basis and that is true probably for most market participants, but from our perspective as institutional investors managing funds for 7 million investors, we are more or less fully invested. As we speak, we are trying to see where there is value, where stocks have moved up too fast given their current and the prospective fundamentals and whether there is opportunity to rejig a portfolio wherever possible and that is where the whole effort is given. Luckily we have been able to create a significant alpha. We are very sure that investors who have not made any money from the equity market for the last 2-3 years, if things work out, there is a very good chance that over the next two years, equity would again become the numero uno as far as returns on the asset classes are concerned.
No comments:
Post a Comment