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market | IST

Market bottom to be decided by medical solution and not financial, says Nilesh Shah of Kotak AMC

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Following RBI announcements, there was quite a bit of volatility in trade and the market witnessed some selling on account of profit booking and worries over Dow Futures.

A day after the government unveiled its Rs 1.7 lakh crore relief package for the informal sector, the Reserve Bank of India announced a slew of measures to mitigate the impact of coronavirus on the formal sector. The monetary policy committee (MPC) cut repo rate by 75 basis point and reverse repo rate by 90 basis points.
It has also decided on a 100 basis point cut  in cash reserve ratio for all banks for the next one year and a three-month moratorium on EMIs.
Following the announcement, there was quite a bit of volatility in trade and the market witnessed some selling on account of profit booking and worries over Dow Futures. However, banks stocks continued to shine.
To decode all the fresh developments and the way ahead for the market, CNBC-TV18 spoke to Saurabh Mukherjea Founder of Marcellus Investment, Vetri Subramaniam of UTI Asset Management and Nilesh Shah MD of Kotak Mahindra AMC.
Shah is of a clear view that the bottom of the market would be determined by medical solution and not by financial solution.
According to him, a vaccine for coronavirus would take more time than a combination of drugs.  He said, "It would be too early to say that 7,500 is the bottom, it is the virus which is going to decide it. The stabilisation in the market this time will be driven by medical solution and not by financial solution. I am sure the best of the brains today are working in finding a medical solution, which could be a combination of drug or a vaccine."
Mukherjea said, "I do not know whether any of us can time the bottom but everybody is looking at Wuhan very carefully. That is the first major industrial zone to go into a lockdown and come out of it. It has been a week since Wuhan has restarted. If Wuhan, southern China doesn't get another Coronavirus breakout for the next two-three weeks, the working assumption around the world would be that if you are able to lockdown a large economy effectively and then come out of it, you don't get to use your phrase bombed again."
So all eyes are on Wuhan from a perspective of understanding how to deal with this issue, he added.
"Until people are able to go back to work in our country which is middle of April or late April, it is going to be difficult to take advantage of the measures that the RBI has announced. So whilst the pyschological relief is palpable, to actualise and capitalise on this extra liquidity that the RBI has pumped in for banks to use the facility to go and buy commercial paper, people will have to go back to work and that is only in the second half of April," said Mukherjea.
For the markets to rally before the second half of April both in terms of visibility from China on what is happening in Wuhan and in terms of practical ability to capitalise on all these goodies that central banks around the world including our one is throwing at us, it is going to be a little difficult from a practical perspective. So, I am not expecting any roaring rally until the second half of April," Mukherjea added.
Meanwhile, Subramaniam said, "I do not think there is any method by which one can model this and certainly not forecast both a priceline and a timeline.  As investors we need to see what it has brought to us and not what is not within our control."
"We have some idea of where valuations are in a historical context and those are attractive and that is what we would prefer to be guided by than by models and forecasts over which we really have no control and little understanding," added Subramaniam.