In an interview with ET Now, Andrew Holland, CEO-Investment Advisory, Ambit Capital Ltd, gives his views on the market. Excerpts:
ET Now: We have seen a lot of back and forth action this week -- a bad Monday, a good Tuesday and a choppy Wednesday. Do you think this is a sign and signal of a market which is looking toppy or is this a sign and a signal of a market which is consolidating, resting and is preparing for the next leg up?
Andrew Holland: It is similar to all markets actually. You have not really seen a lot of volatility in the Indian markets, but we are starting to see that now. The news obviously yesterday with ECB is now baked into all the markets. There are no real big events which we can pin our hopes on in terms of liquidity coming into the markets. So, for India the focus is on domestic issues and obviously we have got the election results next week.
Also, I am not overly convinced for markets going higher from here. If they consolidate, that's great, but all global markets are looking overbought to my mind and we could see markets come down. So if they can consolidate, great, but that's not my scenario. We will probably go down from here now.
ET Now: What do you think is going to be a bigger trigger for the market -- the UP election results next week, the credit policy or is it going to be the outcome of the budget this time?
Andrew Holland: Keeping in view the people I speak to and the kind of feeling which is in the market, all these three seem to be triggers for the market. There has been a positive spin there partly because markets have risen. So expectations have run ahead of themselves.
ET Now: Do you track MTNL? Do you think it makes sense for the overnment of India to divest their stake in MTNL?
Andrew Holland: I have no idea. Maybe they are improving their services, but yeah, I do not know who would want to buy it as a company. That's for sure.
ET Now: What are you telling your clients to buy after the recent price appreciation, so after a 20% price appreciation, where do you see value in this market?
Andrew Holland: I am really not seeing the value. It has been a great liquidity rush and whilst I list into very carefully what was being said yesterday following the ECB and 800 banks applying in the window. On the basis of that, this is good news that they would now be able to, this money would be used to help lend and help the economy, but most of the countries are in austerity programmes. So it kind of flies in the face of what's being said.
Some of the yields that the banks are taking from say an Italy or a Portugal are really because they are getting cheap loans and it is helping for them to fund those lower yields, but that's working on the basis that nothing else goes wrong. So I am a bit worried about that, but liquidity always has a way of just keeping the markets higher for longer, but it does not take much for that to change.
ET Now: Does it seem like the disinvestment target could be met even though with a delay and it does not seem like a Herculean task anymore or do you think we are going to still run into that gap?
Andrew Holland: Obviously good companies will always find buyers. Obviously LIC is a main contributor to the government coffers at the moment in terms of being a backstop for all of these issues. So does it make me feel as though the government has got the fiscal discipline it should have? No, not really.
We will have to wait for the budget. So yeah, they are just trying to mop up in a better market and trying to get as much money as they can before the end of the year, but it does not change anything to my mind in terms of the problems that the government is facing. It is great news in terms of fiscal deficit, but I do not think it has really taken away the problem of the fiscal deficit.
ET Now: Do you think this rate sensitive trade, especially in some of the financials, now is getting slightly crowded?
Andrew Holland: We have been talking about this since December that come March-April, the RBI would be looking to reduce rates. They actually indicated then that it would not be increasing rates. So it is not surprising, but yes, it is a very crowded trade.
When everyone is saying exactly the same thing, you can be absolutely sure it is not going to work out to be exactly what you are thinking. The interest rate play is something we have been talking about and advising, but it has run up very quickly. Again we are just walking away from some of the problems that the banking sector has in terms of nonperforming loans.
ET Now: A word on gold? Do you think the dip that gold actually gave last night should be considered as a buying opportunity and that should be the case for the next 2-3 months?
Andrew Holland: Anytime the price of gold dips, my wife tells me I should buy more and she is the expert, not me.
ET Now: If you have to invest for your wife for the next three years, would you invest in equities or would you invest in gold?
Andrew Holland: Actually she has invested in some of these bonds which guarantee quite a bit of money. So that's where we are.
http://economictimes.indiatimes.com/opinion/interviews/market-expected-to-be-choppy-dont-see-upside-currently-andrew-holland-ambit-capital/articleshow/12095069.cms?curpg=2
ET Now: We have seen a lot of back and forth action this week -- a bad Monday, a good Tuesday and a choppy Wednesday. Do you think this is a sign and signal of a market which is looking toppy or is this a sign and a signal of a market which is consolidating, resting and is preparing for the next leg up?
Andrew Holland: It is similar to all markets actually. You have not really seen a lot of volatility in the Indian markets, but we are starting to see that now. The news obviously yesterday with ECB is now baked into all the markets. There are no real big events which we can pin our hopes on in terms of liquidity coming into the markets. So, for India the focus is on domestic issues and obviously we have got the election results next week.
Also, I am not overly convinced for markets going higher from here. If they consolidate, that's great, but all global markets are looking overbought to my mind and we could see markets come down. So if they can consolidate, great, but that's not my scenario. We will probably go down from here now.
ET Now: What do you think is going to be a bigger trigger for the market -- the UP election results next week, the credit policy or is it going to be the outcome of the budget this time?
Andrew Holland: Keeping in view the people I speak to and the kind of feeling which is in the market, all these three seem to be triggers for the market. There has been a positive spin there partly because markets have risen. So expectations have run ahead of themselves.
ET Now: Do you track MTNL? Do you think it makes sense for the overnment of India to divest their stake in MTNL?
Andrew Holland: I have no idea. Maybe they are improving their services, but yeah, I do not know who would want to buy it as a company. That's for sure.
ET Now: What are you telling your clients to buy after the recent price appreciation, so after a 20% price appreciation, where do you see value in this market?
Andrew Holland: I am really not seeing the value. It has been a great liquidity rush and whilst I list into very carefully what was being said yesterday following the ECB and 800 banks applying in the window. On the basis of that, this is good news that they would now be able to, this money would be used to help lend and help the economy, but most of the countries are in austerity programmes. So it kind of flies in the face of what's being said.
Some of the yields that the banks are taking from say an Italy or a Portugal are really because they are getting cheap loans and it is helping for them to fund those lower yields, but that's working on the basis that nothing else goes wrong. So I am a bit worried about that, but liquidity always has a way of just keeping the markets higher for longer, but it does not take much for that to change.
ET Now: Does it seem like the disinvestment target could be met even though with a delay and it does not seem like a Herculean task anymore or do you think we are going to still run into that gap?
Andrew Holland: Obviously good companies will always find buyers. Obviously LIC is a main contributor to the government coffers at the moment in terms of being a backstop for all of these issues. So does it make me feel as though the government has got the fiscal discipline it should have? No, not really.
We will have to wait for the budget. So yeah, they are just trying to mop up in a better market and trying to get as much money as they can before the end of the year, but it does not change anything to my mind in terms of the problems that the government is facing. It is great news in terms of fiscal deficit, but I do not think it has really taken away the problem of the fiscal deficit.
ET Now: Do you think this rate sensitive trade, especially in some of the financials, now is getting slightly crowded?
Andrew Holland: We have been talking about this since December that come March-April, the RBI would be looking to reduce rates. They actually indicated then that it would not be increasing rates. So it is not surprising, but yes, it is a very crowded trade.
When everyone is saying exactly the same thing, you can be absolutely sure it is not going to work out to be exactly what you are thinking. The interest rate play is something we have been talking about and advising, but it has run up very quickly. Again we are just walking away from some of the problems that the banking sector has in terms of nonperforming loans.
ET Now: A word on gold? Do you think the dip that gold actually gave last night should be considered as a buying opportunity and that should be the case for the next 2-3 months?
Andrew Holland: Anytime the price of gold dips, my wife tells me I should buy more and she is the expert, not me.
ET Now: If you have to invest for your wife for the next three years, would you invest in equities or would you invest in gold?
Andrew Holland: Actually she has invested in some of these bonds which guarantee quite a bit of money. So that's where we are.
http://economictimes.indiatimes.com/opinion/interviews/market-expected-to-be-choppy-dont-see-upside-currently-andrew-holland-ambit-capital/articleshow/12095069.cms?curpg=2
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