India still attractive in the long-term

Vallabh Bhansali of Enam Consultants believes that beyond 9000-10000 level, the market is not cheap.

He says that there exists buying opportunity in the market for the long-term. Mutual Funds are sitting on huge money and they will look at investing into the markets, he says.

India continues to be attractive in the long-term. However, there will be some shifts depending on interest rates, he says. Sensex P/E of 21-22x would be expensive, currently it is at 17x, he says adding, that no major triggers are seen for the next three months.

Right now he is cautiously optimistic on the markets.

Excerpts from CNBC-TV18's exclusive interview with Vallabh Bhansali:

Is this an opportunity to buy and get back into the market for people who have missed out on the rally?

If one is a long-term investor then it is a buying opportunity. Although market beyond 9000-10,000 is not a cheap market and therefore one must possess skills to look for value in this market.

How much will international factors like US interest rates and a weaker dollar influence this market, and the outlook for the economy as well?

I think the world is quite an integrated place and India is more so, than many other countries in the world currently. But to say that global factors won't affect India is not correct, to what degree they will get affected depends on what kind of development happens.

For example, oil prices are going up, interest rates are rising, as well as some calamities in other markets. So it will be a combination of events that would decide the impact in one way or the other.

Having said that, mutual funds have mobilised a lot of money in India and some of them are sitting on cash. I believe India's attractiveness for the long-term will continue although there could be shifts with the high interest rate, dollar interest rate that is prevailing right now. Therefore, these shifts will continue to disturb those who are not informed buyers. One needs to understand the difference between a reaction, a rally and a trend reversal and that is where an investor should be careful.

It is also a correction across all asset classes, precious metals, base metals included, is this what the market might have to live with, where a turn in one asset might filter down to other one?

I think the rally did not get built that way and it may not unramble or come apart in the same manner. These are coincidences. I think asset classes are at some level connected but they are not connected all the way. India a few days ago was considered an asset class by itself and if India is an asset class then that class has not come apart for any reason and one should look at it in that manner.

But will you say that India as an asset class does look expensive even at 9000-11,000 levels, so would you be happy if markets finished the year at these levels?

A lot of people said that Sensex at 11,000 looks attractive, but we are there so one cannot be too precise about these numbers. Now the Sensex is trading at around 17 times next year's earnings by some estimates and at 17 times, given our outlook for the longer term it does look interesting. If the markets went to 22 -23 times, then those numbers would look expensive and that is where most people were expecting a correction and the correction has happened.

What about foreign liquidity, is this a period of pain that the markets will have to go through, because the long-term fundamentals haven't changed?

A lot of these fund flows are unpredictable. Funds have been mobilised for investment in India in the real estate sector and in the equity sectors. Till what point in time these funds will flow into India one cannot predict. So the pain is endemic in this stock market process and there is not one particular pain that one is talking about. Although there is this visual cyclicality like results season. Like once you have the result season then you don't have another for the next three months, so one has to look at these cyclical factors.

Any worries about the sort of earnings that have been posted?

Whenever one is riding on a high wave, performing from there is difficult. Some of the earnings in commodity sectors warrant caution. I think the market has been cautious, commodity stocks have gone down more than other stocks but that is about it, and I don't think the secular trend in India has reversed in any manner.

Would you also be cautiously optimistic?

Absolutely.

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