'India is a growth story; it is not necessary you have to look for value'
'I think the rupee is much better placed than any other currency'
'Nobody knows the real implications of how it will pan out'
I think the rupee is much better placed than any other currency (in the world to absorb the fallout of Brexit) and I don’ think India will see a sharp impact of Brexit. If you see, the Indian rupee has already recovered from its lows of 68.31 or so, now it is up 50 paise.
“You will see further improvement after an immediate reaction and the markets will calm down.”
Vikas Khemani, president and CEO, Edelweiss Securities Ltd, offers some solace to Indian investors who, as the Brexit contagion spread across global equity markets, lost some Rs 4 trillion ($59 billion) when bellwethers like BSE Sensex and NSE Nifty plunged before recovering sharply as trade drew to close.
No doubt, fire-fighting efforts by the finance ministry as well as the Reserve Bank of India helped moderate the volatility, but Khemani cautions that the market has a mind of its own and if the Brexit contagion spreads to other European nations and the cries of exit multiply, then there could be some more knee-jerk reaction in the market.
But, Khemani, image, left, believes that -- and history has proved him right he says -- investors have always made money after such bouts of volatility and will continue to do so.
Vikas Khemani spoke to Prasanna D Zore/Rediff.com
Vikas, first some words of comfort for investors who have lost almost Rs 4 trillion in the market crash today…
As far as India is concerned, the long-term growth story and macro-economic fundamentals are in place. And these (events like Brexit) kind of occasions are a great opportunity to buy. We have had such kind of events multiple times historically and if you see, from those points investors have always made money whether it was the Lehman crisis (the 2008 meltdown of the US economy on the back of sub prime crisis), or the European crisis (exit of Greece from Euro zone).
Whenever such kind of situations emerge in markets, like they are collapsing or have been volatile, investors have always made good returns from those points.
Where do you see value in the Indian markets going ahead for long-term investors?
One has to play with the India story. Wherever India is expected to do well, consumption, investment and banking are the segments that will do well. And remember, India is a growth story; it is not necessary you have to look for value.
You may not find too much value right now but one could find growth stories at reasonable valuations.
Are the Indian markets as well as the global markets overreacting to Brexit?
There is always going to be some reaction and the real thing (about Brexit) is nobody knows the real implications of how it will pan out, what it will take because a lot of things are going to be evolving.
But for now the event is over and nothing is going to change in a day; there could be a two-year smoothening process of exit and I am sure the policy-makers and the governments will make it (the fallout from Brexit) smooth rather than disruptive and over a period of time all the economies of the world will get time to adjust.
After this immediate knee-jerk reaction there will be calm in the market, unless some contagion spreads with another European member following in Britain’s footsteps and then you will have a new round of uncertainty coming about.
Is there more pain left in the market in the short term till a clear picture emerges about the adjustments the world needs to do to manage the Brexit fallout?
That is again very difficult to say because nobody knows what kind of a situation might develop, if not tomorrow then in the next week or month, a few other nations come and talk about holding an exit referendum and not wanting to be part of Europe.
Then suddenly you will see a fresh round of uncertainty coming about. We will need two week’s cool-off time and see what kind of development shapes up in Europe.
Whenever one comes across such kind of situations, where the (stock) markets collapse or are volatile, one gets an upward turn after the crisis blows over.
While the finance minister as well as the RBI governor have spoken words of comfort to calm the equity as well as currency markets, do you see the contagion spreading? Where do you see the rupee and the Sensex six months from now?
I think the rupee is much better placed than any other currency (in the world to absorb the fallout of Brexit) and I don’t think India will see a sharp impact of Brexit. If you see, the Indian rupee has already recovered from its lows of 68.31 or so now it is up 50 paise.
You will see further improvement after an immediate reaction and the markets will calm down.
Are the markets looking at Finance Minister Arun Jaitley and RBI governor Raghuram Rajan’s words with confidence?
Obviously, that helps undoubtedly. Having said that, markets too have a mind of their own and they do not always listen to regulators and policymakers; markets have their own way of evaluating such events.
Would you be buying into this market?
Your advice to Indian investors who want to enter the markets now? Is it the right time or should they wait out a couple of quarters more?
Keep buying into the markets in the next one to two months. You will get brilliant buying opportunities in this market to really invest.
Would you be on a wait-and-watch for the next couple of months?
Every weakness you should use as an opportunity to buy.