Mkt to seek support at 14k levels: IDFC MF

Discussion in 'Professional Video Production' started by ronald, Jun 9, 2008.

  1. ronald

    ronald Guest

    Mkt to seek support at 14k levels: IDFC MF

    India is the only country among BRIC (Brazil, Russia, India and China)
    to have a current account deficit, Ajay

    Bodke, Senior Fund Manager, IDFC MF said. India needs to have a self-
    correcting mechanism as in Europe, he


    Commenting on the market, he said that it may seek support at 14,000

    Excerpts from CNBC-TV18's exclusive interview with Ajay Bodke:

    Q: What is it that you expect to see now over the next few weeks after
    all that has gone by?

    A: I think we expect the market to continue to remain under pressure
    in the short-term. Primarily due to the

    concerns on the macro-front, we were the first ones to flag off the
    problems with the ballooning of balance sheet

    liabilities continuing to impact the market and I think what we had
    envisaged then is more or less coming true.

    In the interim we have seen some very marginal increase in the prices
    of gasoline, diesel and LPG, but the problem I

    do not think has really been fully solved because with under
    recoveries of Rs 2,45,000 crore roughly with crude

    price of around USD 130/bbl subsequent to that we have seen the prices
    touching USD 138-139/bbl.

    Let us remember that every dollar increase in crude prices will
    continue to increase the under recoveries in the

    system by Rs 3,000 crore. Also with the package that was announced
    last week roughly Rs 40,000 crore of total

    subsidies have not yet been allocated and in addition to that we are
    looking at an additional USD 9/bbl increase in

    crude so roughly Rs 27,000 crore. So this is a problem I think will
    continue to have an impact on the sentiment in

    the market.
    We need to have a self-correcting mechanism, which in economies like
    America or Europe is clearly coming to fore.

    It will see an increase in crude prices and it has already started to
    impact the consumption in these countries.

    However, in economies like India and China, which continue to
    subsidize heavily the cost of gasoline, diesel and

    LPG, I think that self-correcting mechanism is not coming into place
    and the consumption in these economies is

    continuing to grow at a very fast pace.

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    So we need to address the issue at its core, we need to see to it that
    some of the measures like largescale

    diversion of kerosene in diesel, secondly the run-away rise in diesel
    consumption due to oil PSUs also has been put

    to use as fuel in place of some of the other fuels that have imported
    market prices.

    These are the supply side issues that you need to tackle if one needs
    to address these issues at its core. I would

    like to point one statistic i.e. 80% of the incremented demand for
    crude and its products over last five years has

    come from those economies that continue to subsidize heavily the
    consumption of these fuels.

    Q: At what kind of valuation levels we will find some kind of a
    support this time in the slide? Are you looking at any

    benchmark kind of levels or valuations kind of parameters at which the
    markets might try to consolidate and bottom


    A: I think a fortnight back we discussed that the markets although
    then were on an upmove. We had said that

    14,800 is a level that the market we felt then could test and we are
    hovering ominously close to those levels. So

    that is the support level that the market will try to look at.
    However, if that reaches then one could see further

    correction overtime of at least 500-1,000 points but that will take
    overtime in the medium-term, I am looking at.

    Q: There has been a lot of trepidation after the outflows last week.
    When you speak to colleagues, associates in

    your circles, what are you hearing about what’s happening with this
    FII participation?

    A: I think year to date roughly we have seen USD 4-4.5 billion of
    outflows and these macro issues are having an

    impact. Let's not forget that among the BRIC countries, we are the
    only country that has a current account deficit

    Brazil, Russia and China all three of them have current surpluses.
    It’s an issue that is important because it’s only in

    such uncertain times, the concern that ever increasing current account
    deficit will not get financed through FII or

    FDI flows that’s when this trepidation as you mentioned comes into
    play. So this is an issue that we need to


    Q: What about the interest rate situation? What are your expectations
    there, the market fears that there will be

    another move from the RBI and the entire rate sensitives have been
    underperforming. What’s your stance there?

    A: I would like to point out that we were the first ones to say that
    the kind of crowding out of private sector

    investment - there is a possibility of interest rate moving up in Q3
    and Q4 due to the macro issues. Hence we very

    much stick to our stance; we still feel that it is better to be in
    defensives, it's better to keep away from interest

    rate sensitive sectors like real estate, banking and financial
    services, and automobiles, better to be in some of the

    defensives like IT or selectively pharmaceuticals or FMCG.
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    ronald, Jun 9, 2008
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