Market Voice: Rajesh Jain, Religare Securities

'Geo-political tension is cause for concern'

Rajesh Jain, executive vice-president & head of retail research, Religare Securities, tells Abhishek Vasudev that the Japan disaster may impact the overall investor sentiment. Edited excerpts:

What will be the impact of the recent developments in Japan on global markets, including India?
The initial financial loss due to the earthquake and tsunami in Japan is estimated at around $2-3 billion. Although the Indian markets are not directly affected, the disaster may impact the overall investor sentiment.

How do you see the markets panning out going ahead?
Before the Union Budget, the markets were showing weakness. However, we have seen euphoria, due to some sector specific announcements post-Budget. But the rally was not sustainable because of weak global markets and mounting crude prices. Inflation is still a concern and the Reserve Bank of India is determined to lower it. The central bank could raise the repo rate and reverse repo rate by 25 basis points each at the mid-quarter policy review, which is due on March 17. Geo-political tension is another cause for concern. Thus, the upside is limited for now, unless we get rid of all these problems.

What are the likely triggers for an upside or a correction?
The main trigger for the upside could be easing tensions in West Asia, especially in Libya. As a result, crude prices may come down. Another reason that can result in an upside in the near-term can be short-covering.

How are FIIs looking at the Indian equity markets vis-à-vis other emerging markets?
At the onset of 2011, FIIs started pulling out from the Indian markets due to high volatility and uncertainty. Hence, the markets started showing weakness and corrected 13 per cent from the top. In 2010, strong FII flows resulted in a steep increase in valuations of many frontline largecap stocks in the domestic markets. It seems that they are not seeing the Indian markets as good short-term bet, but as good investment from a medium-to long-term perspective. As the Indian markets react and valuations come to reasonable levels, FIIs would sooner or later start investing again.

Do you see a correction in prices of precious metals in near-term?
When equity markets fall, money moves into precious metals. Since both gold and silver have had a sharp rally, one can wait for a correction to enter again.