MUMBAI, Aug 14: With the rupee breaching Rs 43 to a dollar, equity markets touching a 24-month low of 2,965.58 and the looming uncertainty on the political front, equity fund managers feel that this is good time to go value shopping. Debt fund managers, on the other hand, say that the interest rates movement will depend on the amount of inflow into Resurgent India Bonds. The market lacks conviction regarding interest rates movement and although there is short term liquidity in the market, it is not sure about the tenure of the same.``There is a lot of liquidity in the market with the auction for 5-year government paper getting oversubscribed with the bids exceeding Rs 5000 crore at 11.78 per cent. These tremors caused an impact on the short end of the yield curve thus impacting the short term rates rather then the long term paper,'' said Dileep Madgavkar, head fixed income, ICICI Prudential Asset Management Company.
``The pressure on the rupee is emanating from outside factors than the intrinsicproblems. Exports are down, all the more due to the bad state of Kandla port which handled around 25 per cent of the exports and imports not picking up,'' said Nilesh Shah, fund manager at Templeton Asset Management Company.
``Notwithstanding the yen and the yuan devaluation, markets here are driven by sentiment rather than fundamentals and thus the inflation adjusted value of rupee has not behaved in line with the real effective exchange rate. The market also depends on the RIBs and if it is around $ 3 billion, the forex reserves will go up from the current $ 24 to $ 27 billion. These pure cash reserves will give enough room to RBI to kill speculation on rupee. If not, the rupee will depreciate and there will definitely be a pressure on the interest rates", added Shah.
On the equity side, the managing director of Tata Asset Management Company, KN Atmaramani says: ``The political uncertainty has already been discounted by the markets and if the government falls, the market may not fall much. Rather, itmay go up a bit on the hope of a stable government.''
``On the economy front, if the RIBs collect as per expectation, the RBI will ease the tension on currency. Also, with this money flowing into the banking sector, the infrastructure sector will get a boost and within six months, the positive impact will be felt on industries like cement, coal and steel,'' added Atmaramani.
The CIO of Sun F&C Asset Management, Gul Teckchandani, feels that this is a good time to shop for value stocks in the markets with a 12 to 18 month perspective of investment. ``The market at this level has a limited downside but there is upside from here. Looking at the risk to reward scenario the upside reward is more.''
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
Printer-friendly page
