Shiv Diwan and Gautam Shroff, co-heads of institutional equities, Edelweiss Securities, shared their views and outlook on the Reserve Bank of India's monetary policy committee (MPC) meeting.
“We have already seen a slowdown in the gross domestic product (GDP) numbers, inflation has remained benign and soft and obviously markets after the whole election rally have probably become little bit expensive. So at 18-18.5 times one year forward, we do believe that it is one of the most expensive times we have seen. Even as a premium to the emerging markets (EMs) this is almost 60 percent,” said Diwan.
“We do expect that some of the quality names may continue to do well but I think the market will trade in a range from 11,800-12,200 till we see some more clarity emerge on the liquidity situation. The hope is that we have seen crude come off a little bit. If that continues then that could be great because otherwise trade wars also will continue to create a mess," Diwan added.
In terms of liquidity driven rally, Shroff said, “I think flows will continue only if we see action from the government and the Reserve Bank of India (RBI) together. So action is something which is much required. We have a policy this week. Anywhere between 25 basis points (bps) and 50 bps, if they do 50 bps then the market will surely cheer that because 25 is almost like a given and that is already priced in. So that is something that will help in action and flows will continue only after we see that decision come through.”
One basis point is a hundredth of a percentage point.