FII flows to continue if the budget is positive

After a lull, the primary market has seen some action in recent months with the government kickstarting its disinvestment programme and a few Qualified Institutional Placements (QIP) taking off. TV Raghunath, managing director & CEO, Kotak Mahindra Capital believes the momentum could sustain with around R5,000 crore-6,000 crore likely to be mopped up by companies in the next few months. Raghunath tells Ashish Rukhaiyar that only some unfavourable news in the budget or the political front could upset the sentiment.

How do you read the appetite for equities now, especially the PSU stocks?

We will probably reach the half-way mark or may be 70% of the R30,000 crore disinvestment target if the NTPC sale goes through. There will definitely be appetite for NTPC and Oil India too should get done but there isn't too much time so some may get left behind unless we see a repeat of 2004 when everything got bunched together in the last one month.

The rally in the markets seems to be driven by liquidity rather than any upside to earnings growth…

Although FDI is down, what triggered the rally is announcements like allowing FDI in retail in September and some more positive action from the government. While the sentiment had weakened substantially on account of policy inaction and flip-flops over the last 18-24 months, September onwards there was a certain momentum. Flows are like water and will find its own level and over the next one or two quarters we will know if flows sustain. As an investor you look for an in-and-out spread, or if you are a long-term investor then you would obviously go through the fundamentals, growth drivers and state of the economy. The secondary market flows need not necessarily reflect in primary market flows or the underlying drivers of the growth. Till December there were not many IPOs and the catching up happened only later.

... contd.

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