Repo boost: Experts hail move, want further policy steps

Experts unanimously hailed the Reserve Bank’s repo rate cut by 100 basis point as positive, but added that the impact on capital markets would not be much. Most experts felt that confidence in the market was low and decisions needed to be taken to counter short-selling and volatility.


The RBI today cut the repo rate cut — the first since 2003 — in a bid to infuse liquidity into the system. (Read: RBI cuts repo rate) After the announcement, the Sensex rose about 500 points but negated the rise later in the day to end 247 points up.


Terming the cut as a prompt move carried out in the best interests in the economy, Deven Choksey of KR Choksey Securities said this is the beginning of a cut and we may see interest rates coming down gradually.


Ajay Bagga, CEO, Lotus India Asset Management Company, feels the rate cut was a big positive that surprised the market. “After nearly three years, this is the first rate cut. It signals the resolve of the regulators to move to a pro-growth stance.”


Shashank Khade, VP, Portfolio Management Services, Kotak Securities, felt the rate cut was expected even as it came a little ahead of time. “I am not sure whether the equity markets will really have too much to cheer immediately. Given the way the volatility in the markets has been, there has to be a much higher reward to actually invest in equity.”


What ails markets now?

Ambareesh Baliga of Karvy Stock Broking said the markets have their own set of problems. “There is a lack of confidence, which will not come just because of a CRR or a repo rate cut.”

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Mkt to bottom at 8,800-9,800: ICICI Securities

Pankaj Pandey, Head - Research, ICICI Securities said he expects the markets to bottom at about 8,800-9,800. Going forward, Pandey does not see earnings driving the markets.

He feels investors should have a portfolio of about 40% in equities, about 20-25% in cash and the balance in fixed deposits. Pandey is bullish on PNB, Axis Bank, Indian Overseas Bank, PNB, NTPC, Power Grid, Infosys and Satyam.

Here is a verbatim transcript of the exclusive interview with Pankaj Pandey on CNBC-TV18. Also watch the accompanying video.


Q: What exactly are you advising investors at this juncture? Do you think that we may be at least close to the last 5-10% of the bottom?

A: We expect market to bottom at 8,800-9,800. After breaking the 10,000 level, from an eight-year cycle perspective we expect, about 55-58% correction. So we feel that we are closer to the bottom range. We advise investors to have a portfolio of about 40% in equities, about 20-25% in cash and the balance in FD.

Q: What have you set your eye on this results season?

A: Results, I think have more or less been a mixed bag across the sectors. second quarter may not have a significant bearing on the market because global cues continue to be bad. Going forward as well, we don’t expect results to drive the markets.

Globally as a thumb rule, I think, contraction of about 10% in US GDP can happen. Whether that happens over a period of three quarters or six quarters remains to be seen. So, we anticipate that nothing major is likely to happen until the second half of 2009. A survey by The Economist says that about three quarters is the most moderate view in terms of the contraction in GDP and probably the most pessimistic view is about 18 months.

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