"This is the third interview of the morning," Ajay Parmar says as he ushers us inside his glass chamber. "Only in the other two, I was the one asking questions," he chuckles.
Parmar heads the research team at Emkay Shares' Rs 100-crore institutional equities business. He is planning to double his team to 36 by the end of the year.
Parmar started his career as a chartered accountant. After six years of poring over the accounts of companies, he switched to stock market in 1994 as he found it lot more 'interesting.'
"Only two hours of trading used to happen then. Brokers used to give chits with number of shares and price written to denote the trades," he reminisces about the days of physical trading in the BSE. Things have changed for the better and along with the volumes, transparency has increased manifold. Ajay Parmar talks the talk with N Sundaresha Subramanian & Khyati Dharamsi.
Is it easy to hire people when the market is falling?
Definitely not. There is a shortage of talented people. That doesn't change with the market movements.
How long do you see the lull in the market continuing?
We are seeing inflation going to all-time high, rupee depreciating, commodity prices going high and the subprime crisis. This is a lot of things. Amidst all this, I feel we are near the bottom of the market. Inflation is not a local event.
It is coming because of the international commodity prices. Those prices cannot remain at such high levels, especially in the context of US slowdown. US slowdown will have lot of impact on rest of the world and the demand for various commodities.
Finally, fundamentals will play out. At this point, it might be a good time to make a killing on oil. But at one point this will also correct. Towards the second half, we might see the inflation numbers also going down from close to 8% to 7-7.5%.
If you compare this with China, which has an inflation of 8.5% in a fully-controlled economy we are not doing bad. The government will also go all out to douse inflation, be it monetary or fiscal measure. I think inflation will come under control in the next 3-6 months.
Market typically discounts this little in advance. When do you see it recovering?
Once you go into the election mode, there will be uncertainty. I don't think there will be any certainty as for as the political situation is concerned. As far as GDP is concerned, second half will be good. Lot of capacity expansion will start happening. India's problem is not demand. The problem was production facilities.
Right now, most industries are working at 100% plus capacities. In steel we are net importers and are almost doubling our capacities. In cement we are going 1.5 times. It means that we are into an investment supercycle. It's $1.1 trillion dollar opportunity.
Will the falling rupee affect the flows?
There will be a little bit of a pause. We are seeing rupee falling 1% in a day. We have never seen such a thing before. But I feel this will stop at some point of time.
But people are talking about 45 levels?
When it was 39, people said it will go to 35, now when it is 42 people are talking about 45. We can't live in the extremes, what goes up needs to come down. Similarly, what goes down has to come back. Sooner than later, it's going to correct or stabilise.
Then the portfolio investors will come back. As far as Indian market is concerned, in the last five years it has grown 43% CAGR. In the middle of so many uncertainties, if we are able to deliver such returns, I don't think any investor can afford to ignore us.
Our view is that GDP will again come into forefront. We are expecting 8.4% growth in FY09.
Where does that put the index?
It is market-determined. We are seeing 4700-5600. That is the Nifty range for this year.
At 16.5-17 PE, the market is not bad. It is a market to enter. Once inflation is under control, the moment people see that they will come back. Steel is down, cement is down. It is getting under control. The reflection in numbers will happen only after one month or so.
What about high food prices?
There is a big food insecurity. With oil prices going up, the US is trying to convert corn into ethanol. That means lesser land for food cultivation. That is a problem.
But they are accusing us of eating too much…
That is their view. At least they are noticing us. Our number is becoming our strain now. Education and healthcare are key issues. But the bottomline is "don't get too pessimistic about India."
Is there bombardment of numbers?
We are getting into a system of moving the market with data. Years back, we were not used to tracking inflation on a weekly basis. We are trying to replicate what's in the US. With more international players coming in, they want something like this. Five years ago, we never used to discuss whether RBI was hawkish or not. Now we do.
Is this trend healthy?
It's a systematic way of measuring growth. It's better to have it quantified rather than having a speculative view. We will see more indicators coming in future.
They will give more indication about what is happening in the economy because now the data is getting collected properly.
Do you see this as the brokers' way of encouraging churn?
I don't know. But this particular year has been the year of economists. They have ruled the market. Not the sector guy. Macro picture has given you lot of hint on what can happen. If you are good in macro, you must have made money by exiting in January.
How do you see the introduction of direct market access system? It could change the way institutional business is done today? We have to see. Overall, there will be one team for execution and one team for advisory. Internationally, it has led to increased confidentiality for the clients and lesser charges. The industry might move towards charging advisory separately.
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