Interest rates may harden further, but are near peaks, says Sandesh Kirkire, CEO of Kotak Asset Management Company. In an interview with Chirag Madia, he said he?s keenly watching the soaring oil prices and growth in developed economies.
How does Indian stock market stack up at this juncture ?
On the broad economy front, things are fine, corporates performance is excellent. However, the concern remains on the area of current account deficit.
Yet, the overall position remains positive because of large capital inflows flowing in from foreign investors. While India will continue to get such inflows, the key risk remains that of developed economies picking up, which in turn could lead to diversion of funds into these markets.
On an overall basis, in 2011 one can say that lesser inflows will come into our markets than that in the previous year.
Oil prices are shooting up. Do you think oil will touch $100 per barrel and how will that impact GDP growth rates and equity markets?
Certainly, it is a cause of concern as it has a direct impact on our deficit. I think it can also stall corporate performance through higher inflation. Higher inflation in turn impacts interest rates in the economy, which in turn increases borrowing costs for corporates.
What do you expect from the coming monetary policy?
Interest rates may harden, but in my view we are closer to the peak as far as interest rates are concerned.
The big challenge is to ensure that interest rates don?t affect the GDP growth rates. I think today inflation is high because of primary articles and fuel inflation, whereas manufacturing inflation is still not very high. While the policy rates have gone up by 125 basis points in the last six months, money market rates have surged by 400-450 basis points.
For instance, interest rate on a 90-day certificate of deposit (CDs) has increased from 4.5% to 8.75-9% per annum.
I don?t believe policy rates are likely to have an impact on interest rates movement.
Equity funds are continuing to witness redemption ….
If we look at the regulation, it all began with the ban on entry load in 2009.
At that time, for a few months, we saw gross sales reducing, but now again they are back at the pre-entry load ban levels. In that case, role of regulator is vindicated for removal of entry loads.
However, the issue is that in spite of all this we are seeing net sales turning negative as redemptions are higher. Overall, on the equity side, flows are resuming and distributors are getting used to new way of doing business.
