Sensex can go to 27000 to 31000 by July 2012 – ET

Posted on March 21, 2011 by

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After weeks and months of underperforming, Indian markets are suddenly outperforming. Global equity prices have come down and corporate India once again has delivered. In an interview with ET Now , Aj it Dayal , Director of Quantum AMC discusses the way forward for Indian markets from these levels.

ET Now: We can start with the big story Japan, what it means for first global economies.

Ajit Dayal: It is a huge tragedy unfortunately what has happened out there and we still do not know what is happening as it unfolds but from an economic perspective globally, we do know that the Japanese central bank will have to keep interest rates low, will have to kick-start the economy. There have been enough stats to show that in previous disasters, Japan’s GDP has rebounded quite sharply because they have had to rebuild the economy and they put a lot of capital back in. So we are still unclear as to the extent of the massive tragedy there. The extent of the economic damage but we do know that governments around the world in some sense will support the Japanese efforts to kick-start the economy and to get it grow.

ET Now: It is a sad human tragedy but equity investing is also about seizing opportunities. So how are you using the current decline in global equity prices to your advantage?

Ajit Dayal: Well, we are in India a focused manager. We happen to be a value manager sitting in a market where inflows and outflows can be very sharp. So if there is a pullback in the Indian market for any reason, if FIIs are scared and they are selling, we have not yet seen that but if that was to happen, share prices would come down. We would look at our companies that we own in the portfolio that we track in our research databases and we try to understand what is the impact on these companies of the tragedy in Japan, what are the opportunities and of course what is the impact if they have got employees there, they are going to pull them back, they are going to lose business etc. etc.

We would rework the numbers and if it made sense for us to buy it at a lower price, higher price with actually buying the stock. So we look at things on a very micro bottom up basis as we call it, not a macro view, or Japan is not going to do well, investors may want to sell out of India, take their money back home in Japan if they are Japanese or if you a US investor, you do not want risk of anything in the world, you sell emerging markets, you sell India and you take your money back. That selling would cause share price to come down. We would more slightly be buying into share prices into shares at that point of time.

ET Now: So are you looking at rampant speculation in coming days and in coming weeks which actually could lead to some asset bubble formation somewhere?

Ajit Dayal: Speculation is the nature of us humans as a breed in some sense, so it is there already. You look at the price of silver from August 2010 till now, silver has outperformed gold dramatically. Now we think of silver as a half precious metal and half industrial copper in some sense because it is used for both, gold is pure precious metal. So we do not know what is happening in the silver prices globally and we have been wrong on that in some sense, not that we are silver analysts. We do not expect it to outperform gold to that extent but there is and it could be that like in the Hunt brothers’ case, there may be a massive calling of the silver market speculation, we do not know but there is speculation, whether it is oil prices, whether it silver, whether it is grains.

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