Common man, market punter, both can cheer says Nirmal Jain, Chairman, IIFL in Economic Times interview

Mumbai | February 02 2017 12 : 15 IST | Economic Times
Global markets are in the midst of powerful rally even as an eerie feeling of a danger looming around the corner continues -- what with the Brexit risk and the global economic slowdown. 

However, Nirmal Jain stresses upon not getting bogged down with such worries and focusing on the near term trend, which continues to remain strong at least for India.

"There are no precedents [to the global monetary setup] but you don't want to be too much ahead of time. A lot of people forecast gloom way ahead [before a crisis takes place] but if you are a fund manager and get out of the market early, you will be penalised," he said. "I don??? think one has to be much smarter than the market or think too much ahead. Be watchful, look at things around. At least for next quarter, few quarters, things are looking to be in order."
Fundamentally speaking, though, he said, India remained in good stead.
"We are seeing that a lot of policy reforms are taking place. Now there is direction to many things... hopefully if monsoon also is good, and GST can go through, all those things put together will put us on a very good sort of platform for a bull market."

Below is the transcript of Nirmal Jain??? interview with Anuj Singhal on CNBC-TV18.
Did you expect this kind of a rally post Brexit and will the market keep climbing the wall of worries?
To be very honest, I may not be right many times but at least in this case, I was not so much worried. Even when I was interviewed by the channels or newspapers a day after, [I said] Brexit worries for India were exaggerated.
To my mind, so many things can happen -- there can be a second referendum after negotiation. Even if that doesn??? happen, the worst case scenario -- Brexit -- happens, is too early to presume that there will be a recession and all of Europe will disintegrate. These fears are all one-sided and even you take a recession for granted, then too India is relatively immune to these things. Amongst the emerging markets destination for investment, India stands out. So, I was personally not too worried that from India??? stock market point of view, this is a catastrophic or a disastrous event.
However, one needs to be cautious because if this leads to some more events: like some banks going bankrupt or some more countries get in very quick succession, then obviously that can have a more serious impact. However, at this point in time, I think that even global markets, not only Indian market have, taken Brexit in its stride and they are moving ahead.
Are global markets moving too fast right now, do you get a sense that liquidity is just driving asset markets crazy?
It is a fact; many people say that there is a bubble, which liquidity is creating. It is very difficult to argue against it. However, at the same time, this has been going on for so many years. So, you really don??? want to be too much ahead of time because there are no precedents [to the monetary response to the crises] and how they will impact human behaviour. There are many people, which forecast gloom much ahead of times. [For instance] in 2005-2004 or earlier [ahead of the 2008 crisis]. So if your an economist, you can go back to your 2008 call when there crisis did take place and you say I said so. However, if you are a fund manager or you are running a business, you get out of the market too early, you will be penalised.
So I think the place where the world stands today is very risky and is precariously balanced. However, having said that, I don??? think one has to be much smarter than the market or think too much ahead. Be watchful, look at things around. At least for next quarter, few quarters, things are looking to be in order. If any event which leads you to believe that something can go horribly wrong then [think about taking action] but otherwise just keeping moving with the market.
How important is the quarter one earning season? We will have of course Infosys and Tata Consultancy Services (TCS) come out same day, Reliance will come out with numbers or same week rather. How important is quarter one going to be considering that quarter four we had some green shoots?
It will be important but not something, which is really decisive because it is more or less discounted that quarter one may be slow or show a very hesitant recovery. Most analysts would expect second half to be much better. So, when you look at this year, mostly people would forecast corporate earnings growth around 15-16 percent and a lot of it can come from oil marketing companies because their profitability can be much higher due to lower subsidy.
Having said that, the more important things to watch will be monsoon and post monsoon how and whether interest rates start coming down now and how investment cycle revives. So, quarter one earnings are important because you will see some bit of turning point. However, if you really want to look at earnings then maybe quarter quarters two, three and quarter four would be lot more important.
Do you see markets making a new high this year?
I don??? remember the previous high.
9,100 on the Nifty and 30,000 was Sensex.
It might touch thereabout or maybe next year is when it can scale the peak. I wouldn't rule it out but it is not something, which is very important at this point in time.
What kind of sectors are you still bullish on? This has been such a bottom-up stock pickers market. NBFCs have done well, of course, you are in the same sector but that has done well; private banks have done well, consumption has done well what remains broadly your key bullish areas? 
Whenever market takes off or market is turning bullish after some gap, the banks that are very liquid attract lot of investments. However, banks, FMCG, cement, auto ??autos selectively -- they all look good. One has to be cautious in IT and look at bottom up stock picking. One also has to be cautious in pharmaceutical stocks and look at stocks bottom up because valuations are already rich and there are different kinds of concerns for different kind of stocks. You really can??? do top down in that sector. Capital goods also -- whenever there is a revival, whatever this government has been doing for last two years now these are early days -- but we actually have now started seeing some results.
So, you see that some small and medium-sized enterprises (SME) sectors are recovering, they are seeing orders, they are seeing revival. Government got into execution mode after this Budget. We are seeing that lot of policy reforms are taking place. Now there is a direction to many things. I think that is a very good sign and hopefully if monsoon also is good, and goods and GST (GST) can go through, all those things put together will put us on a very good sort of platform for a bull market.
What about fund flows?
Fund flows are very strong, I think if FIIs continue to pour in money and whatever little I understand, it is that for FIIs
  2. They have risk appetite, they know how to take risk.
  4. They think that India is a great investment, can absorb investment and give good returns that very few markets can do. So, India by default also stands. And as a market when macro variables are turning favourable, I think most investors are looking at India with lot of interest.
It now stands out from the rest of the emerging markets and obviously it stands out from the [rest of the BRIC pack. That is I think becoming very visible. I have a feeling that fund flow is continuing and that should continue unabated.


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