Even as investors turn nervous about possible outflows from foreign investors on account of the sharp fall in currency, Gaurav Bhandari, managing director (institutional equities), Centrum Broking, says selling is primarily by hedge funds, with many FIIs looking only at portfolio re-allocation. He tells Ankit Doshi that LIC has been buying aggressively in the recent past. Excerpts:
What do you make of the recent fall and volatility in Indian equities?
The recent fall is to do with multiple factors like the macro concerns on India, rupee depreciation, FII selling and the NSEL settlement issues. Rupee depreciation due to persistently high inflation rate leading to tightening of interest rates and lack of any meaningful action by the government are the key factors attributable to the recent fall. However, if you look at the indices then we are now trading at lower band of valuations, and hence I do not see any significant downsides from current levels.
But several foreign brokerages downgraded Indian equities?
Currently the sentiment is extremely bearish and some of these FIIs behave in a particular fashion, hence on the way down they all seem to think we are going to head lower and vice versa. With the bearishness prevailing across, it gives me the confidence that Indian equities are very close to the bottom. We currently are not changing our long term view on Indian markets where we think Indian markets could make new highs in the next 12 months.
Since you cater to institutional clients, what feedback are you getting from them? Are FIIs aggressively selling or planning to exit the market?
The recent outflows were more by hedge funds and they are known to create panic in the market. However, it would be wrong to say FIIs are aggressively selling in the markets as they understand that there is not too much depth in the Indian markets, hence they might not get exit even if they wish to. Most FIIs were not positioned for such a sharp fall in currency and rise in interest rates and thus it is leading to sector rotation. FIIs are doing sector rotation and are shifting more to defensives like IT, pharma and FMCG. On the domestic front, insurance companies, particularly LIC, have been aggressive buyers in the market.
In the midst of all this, where do retail investors feature?
Retail investors are completely out of the market at this point