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The fall in crude prices, the slowdown in benchmark bond yields, and the favorable development of a few other factors led to a contraction in the market; Udayan Mukherjee, editor-in-chief of CNBC-TV18, said in an interview with Santosh Nair, editor of Moneycontrol.
NBFC space would be completely frozen. "Now, things have thawed a bit. Business is going well, it's not a way of closing, "he said, adding that it caused a sense of relief and the worst may be behind us.
Credit problems persist in the system and, for now, he believes, we are a bit of a recovery mode. "But we have to be very vigilant over the next 4 to 6 months to ensure that some of these issues do not explode anymore. I am not optimistic enough to say that everything is behind us, "he said.
Mukherjee believes that investors must now be more vigilant, even in the case of good deals, and marrying with certain sectors and actions might not be a good thing. "idea."
"I just want to leave this idea on the table to people who are long-term investors: the world may have changed a bit now and you need a slightly more tactical or more vigilant your wallet, "he said.
Extracts
Q: We have seen a good decline of the Nifty in the last two weeks. Do you think the market may have bottomed out at the moment?
A: In the short term, between 10 000 and 10 100 seems to be a relatively stable place for the Nifty, from which the rebound took place. We are on the way to the 200-day moving average near 10,800. This is not only because of the short coverage, but also because of some factors that have changed around. The fact that crude oil collapsed by 15% from $ 86 a barrel to about $ 73 to $ 74 a barrel, was a big change for India. For this reason, coincidentally or as a result, the return on the benchmark bonds also declined from 8.2% to 7.8%. These two problems were the main problem of the market, namely the behavior of the bond market and the crude. And both have gone backwards and forwards, which is at the root of this downturn that we are witnessing.
At the same time, we found that positioning had become extremely short in the October series after the significant fall of the Nifty and that short positioning has now begun to drop as November approaches and the long positioning has increased. In a sense, the market was very light and therefore, the ability to take long positions is still there, which tells me that the market will probably not have much trouble moving towards the 200-moving average. days.
Now, once we get there, we have to sit down and take stock once again. Because then, many shorts will be excluded from the system and the market will have adjusted to lower crude. Then, we will have to see if the global factors allow us to realize this decline beyond the 200-day moving average which is technical resistance. Given that the market will have its election season in two or three weeks, we will also have to take stock of it.
So we are currently in withdrawal mode. I do not think we've left the wood completely, but the market only takes into account some of the problems that have changed in our favor over the last two or three weeks.
Q: You mentioned two. key factors. One was bond market returns and the other was gross. Specifically, in terms of bond yields, do you see the situation changing quickly or have things really cooled for the moment?
A: The situation has been very bad for a while and we have a bit of a break because all this news IL & FS has a little simmering, people talk about predicting it. There was a fear that all this NBFC space froze completely. Now, things have a little thawed. Business flows, this is not the stop mode. As a result, it has created a sense of relief that the worst is perhaps behind us. Maybe that's it. But, thinking that things have come back to what it was four or five months ago, to this kind of cash in the system, it would really push the case.
We are still in a very tricky situation with the overall NBFC bond market situation. Right now, there is some relief and I feel that the regulators and some of the most powerful players have done a good job of ensuring that we do not have a serious credit default situation . To that extent, people breathe a sigh of relief.
Now, the purpose of all this is that after a bad phase, as soon as you see the first sign of stability, everyone rushes to say that the worst is behind and now everything has been settled. It's a little jump the gun. We have to wait and see how things go. Credit problems persist in the system and, for the moment, we are somehow saving lives, but we must remain very vigilant over the next 4 to 6 months to prevent some of these problems from exploding in the first place. new. . I am not optimistic enough to say that everything is behind us. All we can say is that it is better than what it was two months ago. It improves and we have to keep our fingers crossed.
Q: How do you badess the overall macroeconomic situation? In October and sales of two-wheeled cars for October, the numbers were not so inspiring.
A: Macro-economic problems remain. There has been a bit of a break, but GST revenues indicate that we will have a budget deficit, which means the government will not be able to get out of business, which is a tightening factor. of the economy. On the other hand, we could be facing more taxes in the next budget. This is possible because of the shortfall of GST. The current account deficit is also a problem. The rupee does not grow significantly in the short term. So these headwinds remain.
Now, for 10 days, things seem better because the crude is between 73 and 74 dollars a barrel. For some reason, for some reason, as we saw a few weeks ago, if the crude started to bubble up and come back over $ 80, all of these macroeconomic problems that we are less breathing in today are not the same. They are coming back to the table. 19659002] The macro is fragile, we have a little respite right now, but we do not need to party, we have to be careful and be very cautious, because the situation is going to be very volatile for the next months. . Macros are still not sorted. We can not solve the problem overnight and we just have to go through this phase hoping that a global shock or a raw shock will not resist us again.
Q: What was your badessment of the second quarter? gains so far?
A: The earnings season has been uneven. At the end of it, Nifty's earnings or Nifty's expectations will be reduced again. There were positive surprises, such as L & T and some private banks, but also in the telecommunications sector. But overall, we will still have net net gain downgrades at the end of the season.
It's not so bad that Nifty's earnings go down by 2 to 3% at the end of the season. . In my book, this was always going to happen because we started the year with profit growth forecasts of 24 to 25% and we have already returned to 16-17%. We will end up with earnings growth of 14-15% for FY19. Analysts are already turning to Fiscal 2014, where they will again present a rate of 25% and then hope that things will complete miraculously. We had a season of earnings up and down, but we did not have the calendar of results for this quarter. So we do not need to be discouraged by the winnings, but we do not need to celebrate or celebrate. So the profits are not what is causing the delta on the market right now. The greatest impulse or the biggest impulse really comes from the macro, will come from politics by the end of the month and the whole world.
Thus, as I said in my last discussion with you, incomes are still important medium-term. But for now, the income is somewhere in the no man's land. This is not great, it is not so good and so it does not cause the next big push. The biggest impulses are the three that I mentioned – not necessarily in this order – macro, global and political.
Q: You just mentioned politics. How does the market react then, say that the results are not favorable to the party in power?
A: This is not an election. You have three, the biggest ones. So, it is a combination of what happens. The market will be worried if BJP loses Rajasthan. If he loses Rajasthan, but manages to sneak into Madhya Pradesh, the market will breathe a little easier. Chhattisgarh, we do not know, it's too close for me to hear.
So, it depends on how these three states develop and the market will have to be content to say, well, between these three possibilities now. that we see what that means for Central Elections next year. It's so complicated, but all we can say is that we'll know it on the day of the announcement of the election results and that it will be a great day for the market, I'm sure. 39; guess. But at the moment, it is the recipe for volatility that prevails today.
Nobody knows what will happen. But the market is worried, he is nervous and as a result, he will feed India Vix with the approach of the elections and the date of the result and this will be an additional factor to take into account. After the results, we will obviously store and badyze these figures and see what it means for 2019.
Q: In recent months, you said that investors should clearly focus on capital protection or rather on the protection of capital. Preservation of capital. So, how does a position of this portfolio end of the year?
A: It's a difficult position. As I said before, it also depends to some extent on your timing, because what may work for the next six months may not necessarily be for the next three years.
But there is another point I would like to mention. this time. The general view of the market has always been that you have to buy good businesses or what looks like good businesses, and then keep them for a long time. This has been altruism on the market and I'm not saying that it should be discredited. But the events of the last 6 to 9 months suggest that you probably need to have a slightly more tactical edge in creating your portfolio these days, as things change a lot. And if you do not react to the way you consider some of these flavor changes, it is highly likely that your wallet will not come out very well. I am not saying that you should stop being an investor and become a trader, far from it, investors will always earn more money.
However, linking to certain sectors and actions may not be a good idea. I will give you some examples too. If you look only at the beginning of this year, I do not even go down in history and if you look at most of the mutual fund and professional investor portfolios, you would have found that the biggest additional charge was in the sectors. . like the oil marketing companies, everyone had a ton, automobiles – everyone owned almost every car share. And you had some of these private sector banks. Things started to change somewhere in the middle of the year and we are now saying that oil marketing has been the biggest destroyer of wealth this year. cars, even large stocks like Maruti Suzuki, have lost 25 to 30%, forget Tata Motors, which is one of the biggest howlers, and you've seen some of these private banks like Yes Bank, IndusInd Bank absolutely implode.
So, you have to be a little vigilant about good businesses and, when the tide turns, you have to make adjustments to the portfolio. So I just want to leave this idea to investors for the long term, that the world may have changed a little bit now and that you need to focus your strategy or portfolio a little more vigilantly. [19659002] Q: Congratulations on your first novel, I enjoyed reading it. I just wanted to ask you was this a story you wanted to tell for a long time. Is this something that has been in your head for many years or have you touched on a few themes and decided it was probably the best story to tell?
A: I have a lot of stories in my head. The stories will come out one after the other. I do not have your hectic life to manage, I do not go to the office every day. I am sitting here in a very quiet place and, therefore, I have plenty of time to indulge my thoughts. I've thought of a story that I have written and hope it works for readers. I hope some of your viewers and readers will also take a copy and read the book and hope that they will like it. But there will be more. I'm not going to stop at a book, it was not like we were doing it for a lark, let me try a book. I enjoyed the process so much that I fully intend to write more. I hope that these books will be accepted by publishers and readers and that I will be able to continue writing. It gives me great joy and I cross my fingers on the first one. I hope that the market space and the space of the reader will give me the opportunity to write more.
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