Come February 29 and Finance Minister P Chidambaram will be in the hot seat. All eyes are on the FM as he presents his 7th Budget.
How does the investment scenario look like? Will the US recession have an impact on the Indian scene?How are the markets going to react to PC's Budget?
To find out all the answers, IBNLive.com organised an online chat with Anil Chopra, Bajaj Capital Group CEO and Managing Director.
Here we reproduce the full text of his chat.
Madhav: Anil, USA recently had to cut its interest rates twice and Britain followed by cutting 25 basis points. How do you see the base-interest-rate by RBI and FM affect us in India, and what would be its impact on stock-exchange if we happen to cut our interest rate to 50 basis points in next 1year?
Anil Chopra: After the US cut rates drastically, RBI was also expected to follow with at least a 25 bps cut. However, the structures and problems affecting the two economies are different. RBI has chosen to wait and watch for inflation and for clues to suggest a slowdown in growth before choosing to cut rates. High rates in India will primarily lead to increased foreign exchange inflows in India leading to a rising rupee. But in the immediate term this is not the worry as FIIs continue to sell heavily. A rate cut by RBI in the next 1 year is likely to have a positive impact on the stock markets in India depending on the circumstances under which RBI cuts rates. But it will definitely be positive for interest rate sensitive sectors such as Banking, real estate, auto, consumer durables, etc.
saurabh jain:sir do u believe that the risk aversion which is going on will stay for a year or so ?
Anil Chopra: Yes, the current bout of risk aversion is expected to continue for about 12 months as the US financial sector continues to reel under the impact of the sub-prime led slowdown.
mark: What is the outlook of Paper industry - what rate of return can be expected, particularly from stocks like TNPL, BILT, Orient?
Anil Chopra: Paper industry has seen some inorganic expansion by way of overseas acquisitions by the leading players. Also, they have started acquiring plantations in different parts of the world including South East Asia and North America. Paper industry is currently going downhill in North America, its stronghold. But strong demographics and robust growth in India and China should help the paper industry emerge stronger in the near to medium term.
balwindar: what are your views on NTPC in medium term?
Anil Chopra: NTPC is a good investment for the long term. The recent correction has highlighted the bearish sentiments prevalent in the power sector. Presently it trades at a trailing PE of 23 being the leader in thermal power generation and expected to be a beneficiary of the Indo-US nuclear deal. Further corrections should be seen as a buying opportunity with a long term horizon.
Abhishek Jaiswal: What do you think are the reasonable levels at which the market would stabilise?
Anil Chopra: The markets are expected to stabilise at a trailing PE between 18-22.
Akash Singhvi:How do you think will the Investment banking arena perform in the future.? Will it see consolidation in terms of small players being taken over by existing major domestic players or major foreign players entering the indian markets?
Anil Chopra: The overall banking and financial services business including Investment Banking, in India is geared for a round of consolidation in the near future. Such consolidation is good for the industry before it opens up to the world and faces stiff competition from global players who are larger in size and have much deeper pockets. Investment banking has been opened up for foreign players to a certain extent and small domestic players should merge to form bigger entities who can take up the competition.
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Ravi Chandra: Hi Mr. Chopra, I would like to know when an economy of a country gets free from other markets? My second question is, In a global economy, When developed markets are dim (like US), Would the economy of a country gets affected irrespective of whether you are in emerging market or developed market?
Anil Chopra: Today, with the advent of technology in the field of communication, increased free flow of data, news and information and the ensuing globalisation, the markets and economies have become increasingly interlinked. Hence, the theory of de-coupling works for a very short term. If the pain in global markets persists then it is bound to percolate into and affect the Indian markets as well. On an economy basis, the effect on India will be less as growth in Indian economy is being led more by domestic consumption and investment than by exports. Emerging markets generally have a high beta i.e. they get affected more than developed economies by adverse global events.
Zubin Sanjana: Is the budget going to have a very deep impact on the stock markets ?
Anil Chopra: Budgets generally have considerable impact on stock markets. However, the oncoming budget is expected to be a populist one and hence chances of drastic changes in policies are less. Overall, it depends on the plans and policies presented in the budget.
Jimesh Gandhi: dear sir, please view your suggestions on the budget expected for salaried class individuals, as the tax is always burdened on salaried people. Kindly suggest your views.
Anil Chopra: We expect Salaried class people to get tax benefits in terms of increase in basic exemption limit and in the deduction u/s. 80C. A cut in tax rates might also be on the cards.
dice: Sir, Iam willing to take some risks in investing in Mutual Funds. Please tell me some of the best Equity Diversified mutual fund to be invested in 3 -5 yrs?
Anil Chopra: You can invest in - Sundaram Select Focus, Reliance Vision, DSPML Top 100 Equity Fund, Birla Sunlife Frontline Equity Fund, HDFC Equity Fund, Franklin India Prima Plus
Nirmal: In my savings, how much % should i invest in equity, MF, Insurance and GoI Deposits?? what could be the ideal breakup to gain good returns??
Anil Chopra: You need to mention your age and risk profile and then get a financial plan prepared for you. This will help you. The asset allocation as asked for by you should be done having regard to your age and risk profile, needs and future goals only.
Akash Singhvi: Hi Mr. Chopra. I am 27 yrs old working with a financial services firm in bangalore. My monthly take home is 32,000. I have a standing commitment of EMIs for Education loan and Car Loan for a total of 11000. Rent of Rs. 9000. What should I do to come out of this Debt as soon as possible. I am married and my wife is a housewife.
Anil Chopra: You need a financial plan prepared for you at the earliest. Please visit the qualified financial planner at your nearest Bajaj Capital Investment Centre. He will help you in preparing a plan for you to save, invest as well as repay your debt effectively.
Sriram: Hi Mr Chopra. Do you think in the talk of US recession etc you would advice keeping money in MFs and Stocks ? Will this be wise ?
Anil Chopra: US recession will impact India too, but to a considerably lesser extent than other markets. Indian equities, particularly those in the domestic consumption led and investment led sectors such as FMCG, telecom, media and entertainment, banking and infrastructure are likely to do well over the next 3-5 years. It will be wise to invest in quality stocks from these sectors as these are available at attractive valuations post the recent fall.
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Prasad Lele: These seem to be very uncertain times. The sensex has fallen drastically and I my capital has been seriously eroded. However do you think a frther fall is possible or should I buy some stocks whch are looking very attractive right now like GMR Infra, Indiabulls finance, odrej Industries, HBL Power systems, RNRL, Jaiprakash associates, Suzlon energy, Siemens, ABB etc. What is your gut feeling?
Anil Chopra: The recent times have actually been turbulent and most of the investors who have invested in equities over the last 4-6 months have seen capital erosion. However, these kind of falls are a regular feature of equity markets and long term investors should not be worried about it. Rather they should see these dips as buying opportunity. You can invest in stocks from the infrastructure and FMCG space with an investment horizon of 3-5 years. You can stay away from the power sector for the time being as sentiments are very pessimistic for this sector. Also stay away from stocks such as RNRL who do not have a steady stream of cash flows as of now.
Dhaval Nathwani: Hello sir, I am student and had invested my savings into stock by doing averge, I had tried to diversify my porfolio by having different shares, currently I am holding 80 shares @ 127.4 (power grid), 45 shares @ 172.75(rpl), 2 shares @ 2476(Jindal steels and power limited), and 50 shares @ 58 (orient ceramics), and now i had got now money to do further average. My question is sir what should be my approach shall i invest it for long term and wait or shall i book the profit in short term with this scenario. please advice.
Anil Chopra: Your portfolio suggests that you will not have any short term profits to book as on today. You should invest in bluechip stocks with strong fundamentals rather than investing in stocks that do not have a present stream of earnings and are traded on their embedded value such as RPL. Power Grid, Jindal Steel and Orient Ceramics are good but should be held with a long term horizon only.
brij mohan sabhlok: where are we being led through present scenario of the market.how can we plan investments so that inflation and safety are taken care of.also considering the tax factor and the return.i think different age groups would need different approach.can you help people in guiding them keeping in mind the above factors.
Anil Chopra: Sir, whatever you have asked for will take considerable time to be explained. You are hence requested to visit a qualified financial planner at your nearest Bajaj Capital Investment Centre who will help you in planning your savings and investment.
Ramesh: How about Indian Software market right now?
Anil Chopra: Software sector is yet to bottom out. However, it seems to be approaching the bottom quite fast. Expect it to do better in the 2nd half of CY 2008.
anup bandyopadhyay: what in your opinion is the forthcoming market scenario taking into account the recent abnormal fluctuations in the stock market.would it be prudent to wait n watch rather than go for investment from a common man's point of view?
Anil Chopra: The equity market is likely to remain volatile and range based for some more time. Wait & watch is a good strategy in such turbulent times. however, a long term investor should also use these dips as buying opportunities in quality blue chip frontline stocks. However, fresh investments should be staggered over the next 3-6 months in the form of SIPs or STPs.
ccol. kirit joshipura: i want to invest in some good shares for long term ( 2-3 yrs) pl advise me which scripts & entry price. is it advisable to buy spicific sector funds ? or buy diversified equity funds are best? in view of american mkt condition, how will our mkt behave? thanks.
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Anil Chopra: Stocks from banking & financials, infrastructure, FMCG as well as state utilities having large and stable cash flows seem attractive. It is not advisable to buy sector specific funds if you have a low risk profile. It is better to buy good diversified equity funds with a good and consistent track record with a long term view.
Naresh:Hi, Which sector looks strong for the coming one year?
Anil Chopra: Banking & Financials, Infrastructure, FMCG, etc.
Rajat Singh:There is an undercurrent of general speculation that from March onwards, the US is planning a gradual pullout from Iraq resulting in a bounce back for the dollar resulting in depreciation of the Rupee. Should that happen ...is it a good idea to stock up some dollars?
Anil Chopra: Global geo-politics is increasingly uncertain and decisions like a pull out from Iraq are extremely hard to predict reasonably. Any investment decisions based on these assumptions or under currents might go wrong any day. As regards the US dollar, it seems to be cheap at these levels and is likely to bounce back in the 2nd half of 2008 as the US economy improves.
mark: What is the outlook of chemical Sector - what rate of return can be expected? particularly stocks like India Glycols, Aarti Industry, SRF, Tata Chemicals
Anil Chopra: Chemicals is a cyclical sector. Stocks mentioned by you had been benefiting from the upcycle in commodities which had been prevailing for the last 4-5 years. However, with the ensuing global recession, commodities are seen correcting a bit. Stocks like Tata Chemicals have particularly benefited from their robust inorganic expansion plans of late. They should see strong growth in volumes going forward. however, margins are going to be under pressure.
Akash Singhvi: What are your views on the Primary markets after the recent happenings with the EMAAR MGF and the Wockhardt Public issues.? Is the next issue of Reliance Infra going to impact the markets in the same way as the Reliance power issue
Anil Chopra: Whatever has happened with the recent public issues mentioned by you was due to the issuing companies demanding substantially higher valuations, weak sentiments in the markets and lack lustre interest from FIIs in IPOs. The only way the reliance power issue impacted the markets was probably by absorbing substantial liquidity from the markets. whether the reliance infra issue does something similar to that or not depends upon the issue size and the attarctiveness of the issue. The primary markets going forward will see IPOs at more rational valuations and leave something on the table for the investors.
karthik: Is the market seeing to much resistance at 18K mark?is the global fluctuations the only reason for it?when can one expect this volatality to end?
Anil Chopra: markets are presently seeing bouts of selling at higher levels. This shows the underlying bearish sentiment in the markets. Weak global cues and resultant FII outflows seem to be the primary reason for the weak sentiments. This volatility is expected to continue in the short term as global cues are likely to improve only in the 2nd half of calendar year 2008.
Adityan: Will IT get affected by US recession ?
Anil Chopra: Yes, IT might get affected by US recession as Indian IT exporters get maximum business from the Banking & Financial industry which has been the biggest loser in the subprime turmoil.
Vijay: Dear Sir, Good evening: Which Mutual Funds would you rate as the top 5 to invest in 2008
Anil Chopra: You should opt for good equity diversified funds. Follow proper asset allocation strategies, keep large cap fund allocation at 50-60% of your total equity portfolio. Choose funds from large and reputed mutual fund houses which have a good track record for eg. Reliance, DSPML, ICICI Prudential, Sundaram, Birla, SBI, HDFC, etc
kewal khanna: Manufacturing creates multiple jobs. India is becoming a service sector hub. Should not budget provide more facilities and liberalisation for manufacturing sector? A strong manufacturing sector is a national strength.
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Anil Chopra: India has become a service sector hub. But of late there has been increasing focus on the manufacturing sector including infrastructure and this focus is expected to continue at least in the 11th Five Year Plan which ends in 2012. This should indirectly benefit the manufacturing sector. However, we agree that a lot remains to be done in the manufacturing sector.
naveen:what's the outlook of software companies in the short term. Can i go ahead and invest in IT sector
Anil Chopra: Software companies are trading at attractive valuations. They have seen a slowdown in growth and margins have eroded on appreciating rupee and rising wage pressures. However, global situation should improve in the 2nd half of 2008 and software sector is expected to rebound over this possibility.
raheem: where are the markets headed? india has a strong growth but due to the global cues do u cee the market going up with election year in usa &then india wht do u advise
Anil Chopra: Indian economic growth has been strong and is likely to be so in the foreseeable future. But stock markets do not necessarily follow economic growth in the short term. Hence there might be bouts of volatility in the short term. However, the long term bull trend remains intact even after the recent fall. As regards global cues, they are likely to remain weak in the 1st half of 2008 and should improve going into the 2nd half. The Indian markets may consolidate in the short term but are expected to gain over the next 12-18 months. Elections have become increasingly ineffective of late in deciding the market direction except in the very short term like what happened in 2004 when the UPA govt came to power. But the long term uptrend remains intact
Nadeem Akhtar:Looking at the current market scenario, which has impacted the stock market and mutual fund and given them a back seat, what you think the upcoming buget will help AAM AADMI and let the investment confidence rebuild / going on.
Anil Chopra: The upcoming budget is expected to be a populist one and hence, it is likely to have some tax benefits for the AAM AADMI. Tax benefits are likely to leave more disposable income in your hands and hence encourage investments.
sunil: hello sir , my age is 31. i am an active investor and has been investing in mutual funds regulalry through SIP's . i had been investing 5000rs since jan 2005 every month and have increased to 35000rs a month from this january onwards and i am investing in 6 funds . after the market fall i have become little wary and worried . how would u approach the market given the downward trend we are seeing and what shoudl my investment horizon and approach.
Anil Chopra: You have rightly approached the markets by investing through SIPs which should be continued with in the future, as the very structure of SIPs is such that they guard you against or cushion the impact of such short term volatility. Your investment horizon should stretch for next 3 years and the approach should be through SIPs only.
Karthik Kamath:Which are the sectors which you feel will not be impacted by the US Recession.
Anil Chopra: Sectors driven by domestic consumption and investment are likely to be less affected by the US recession. This includes FMCG, Infrastructure, Capital Goods, Oil & Gas, Engineering, Media and Entertainment, Telecom, Power, etc.
piyush raval: what do u think abt finance market ?
Anil Chopra: Please clarify what you mean by finance market.
Hareesh: 1. How is the future expectency for Infosys shares as I had bought the shares a year back for Rs.2056/- per share. 2. How is the future for SGN Cables...how long should I hold it.
Anil Chopra: Infosys and other export oriented IT companies has been affected by the appreciating rupee, rising wage inflation and slowdown in the US over the last one year or so. Infosys is likely to see some further slowdown in growth and falling margins can impact its profitability too. But we expect things to improve in US in the 2nd half of CY2008. This will give a boost to IT exporters such as Infosys. If you have a long term horizon you can continue to hold it for some more time as it appears to be close to bottoming out. As regards SGN cables, it is a very small cap company, is highly illiquid and has shown high volatility in its earnings. It is definitely into an attractive industry but not much information is publicly available as regards the company. Hence we reserve our comment on SGN cables.
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