Manish Sonthalia, head of equities-PMS at Motilal Oswal AMC, spoke to CNBC-TV18 about the current trends in the stocks market and outlook.
Sonthalia is of the view that the default of AAA rated companies will have its repercussions. "It is like a flashback of the Lehman Crisis," he said.
“There is negativity all-round, one just hopes the contagion does not spread to banks. Something needs to stem this scare and if things get sorted out we will pullback immediately but if this keeps on lingering then there is further downside,” Sonthalia said.
According to him, "It is very difficult to take out the fear from the market of a AAA rated company going to default in short period of time. However, the authorities could look at infusion of liquidity through the banking system than offering it direction," he said, adding that the fear is too big, the amounts are too large and very little help is coming across.
With regards to the fund flow situation in the market currently, he said, "Redemptions are there but the gross inflows are still higher than gross redemptions. So net-net flows are still positive but the flows have come down to a trickle."
“Gross inflows have dried up altogether and that is leading further rollover issues etc and no fresh subscription to papers. The short tenure on the yield curve has started to spike 25-50 bps and may not go back in hurry because we further monetary policy coming in soon, where one can see a 25 bps hike,” said Sonthalia, adding that all this is not good tiding from bond market perspective.
“Equity markets won’t see positive returns at least for next three months, unless things change very quickly and there is positive news at the margin. There is hardly any money to be made in India at least for the next three months, “he said.
"Therefore, as of now cash is king and it is better to stay on sidelines and watch the situation," he said.
Have you signed up for Primo, our daily newsletter? It has all the stories and data on the market, business, economy and tech that you need to know.