After Tuesday's bounce back, Wednesday's upmove was more or less expected, says Mihir Kothari of Motilal Oswal Securities.
As regards the market crash, Kothari says that the pressure in the metal space caused this meltdown. He prefers to call that correction as unwinding of positions. "Whenever any speculative position unwinds, we are bound to see some amount of margin pressure in a market of this size and depth,' he says.
He calls the amendment to the RBI Act as a postive and right move, which will give impetus to banking sector.
Excerpts from CNBC-TV18's exclusive interview with Mihir Kothari:
Are you surprised at the strength of the pull back?
Going by the way the market bounced back yesterday, the move today was more or less expected. Now it is settling down.
What is your call now on the metal space, both ferrous and non-ferrous?
The way the weakness came, it actually took everyone by surprise. We are not metal experts. But our view is that the unwinding that we saw on the LME, which triggered this crisis, was more of a trading unwinding, a speculative unwinding. Fundamentally on the metal space, we don't feel there is anything, which is a huge concern.
What has also given a lot of strength to this belief is the fact Hindalco Industries today has raised prices, which is quite heartening. So I really don't think there is any concern on the metal space.
What are you expecting Tisco to report tomorrow?
I think the number should be more or less in line with expectation. In fact, Tisco has been one of the best performing stocks today. It got beaten down in this entire meltdown, but I think numbers should be more or less in line with expectation.
Where did you think the knock really come in from? Was that margin pressure that kicked in yesterday and made the markets slip so much and in that case are those troubles behind us?
One has to look at the entire fall in the span of 3 - 4 days. Basically, it all started from the pressure in the metal space, and it just went on spreading to the rest of the market.
I look at as more of an unwinding. There are no genuine concerns as of now. Whenever any speculative position unwinds, we are bound to see some amount of margin pressure in a market of this size and depth.
Would you recommend anything from the midcap space?
On the banking side, we have been positive on stocks like State Bank of India. Syndicate Bank looks very interesting. Overall we are positive on the entire sector.
Any thoughts on financial counters like IDFC?
IDFC is a fairly steady and stable stock. But I don't think from these levels, it is going to move very fast or give you dramatic returns. It is a steady bet, but I don't think it is going to be too much of a trader's paradise.
How would you read the amendments to the RBI Act?
It is a positive step in the right direction. Banking, which has under performed the markets in the last two quarter, with the impetus like this should do well.
As far as the markets are concerned, this kind of rally clearly shows the inherent strength in the market and the amount of money that is waiting on fences to come in. It is another confirmation that the markets are on a fairly strong foundation.
What did you tell your clients to do with Reliance Petro?
We feel that Reliance Petroleum Ltd is going to stabilise around these levels. Let us not forget, it is a very large capital-intensive high gestation project. So one is not going to see any fireworks in terms of any positive surprise from the company.
Disclosures: None.
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