Don't expect mkts to breach past lows: Kotak Mahindra Bank

C Jayaram of Kotak Mahindra Bank said the markets would certainly test earlier lows over the next couple of weeks. "I don’t expect it to seriously breach previous bottoms. Over the next couple of months or so, the markets will settle in a range before one can make any further prognosis."

Here is a verbatim transcript of the exclusive interview with C Jayaram on CNBC-TV18. Also watch the accompanying video.

Q: What’s your own sense of where this market is headed, not just over today, tomorrow or day after, but over the next few months?

A: Over the next couple of weeks we would certainly test the earlier lows, and unfortunately, currently we are only seeing negative news whether it’s on the global or on the domestic front. We are seeing a spate of negative news across sectors, broader macros all of that. So, my sense is that it will test the previous bottoms. I don’t expect it to seriously breach the previous bottoms and over the next couple of months or so one will have to see it overall come down and the markets settle in a range before one can make any further prognosis.

Q: What’s preventing any kind of buying in these levels? We have got down to virtually 8,000 levels on the Sensex, are you surprised that we are not seeing even here by the way of value or investment buying or are people waiting for the previous low to commence?

A: Yes, and they are waiting for a couple of things. First, to get close to the previous lows as possible and also any sort of positive cues from the global markets and I think one would begin to see some short covering and positive investment buying when both these are satisfied.

Q: What are you hearing about how the institutional investors are approaching the market because along with these seven days of falling we have had a quiet bit of selling in the cash market as well?

A: A lot of aggressive selling by the FIIs is pretty much over and right now one is seeing some peripheral for a selling accentuated by the fact that currently we are trading at very thin volumes. Even one institution coming and selling a half decent amount can bring down a stock pretty badly, so I don’t think this is serious aggressive selling that you saw in October and my sense is that most redemptions from hedge funds, etc. would already have got factored into a large amount, and while there could still be some peripheral selling again it wouldn’t amount as much as what was there earlier.  

Q: Is there a sinking feeling settling in the market that this is going to be a much longer term problem to fix and not just a quarter after which things will recover? Is that what is making a lot of equity investors nervous too?

A: It’s beyond just the markets itself and it has got to do a little bit with the real economy. My sense is that when such major sell off started, it was essentially confined to financial markets and there was a belief, partly influenced also by people in government, etc., trying to calm people down by saying that the real economy is not going to be seriously impacted. But over the last few weeks it is now becoming more clear that the real economy also has a lot of pain and the pain could be much longer than what most people had factored in initially. However, this realization is now spreading across the system and corporate India pretty much recognizes it right now and it is now starting to go down to the next level which is the average man on the street. There is a little more concern right now than what was the case a couple of weeks back.