ET Now
In a chat with ET Now, Arun Thukral, MD & CEO, Axis Securities, talks about the market and shares his views on the Bank of Japan’s easing of monetary policy. Excerpts:
ET Now: The Bank of Japan’s decision to basically crank up its monetary stimulus seems to have given our markets quite a boost. What did you make of it?
Arun Thukral: The announcement from the Bank of Japan was a welcome move for the markets and that is why we saw this roaring rally. They have added around 30 trillion yen. So, that makes around 70% of the US QE, which is a big number for us. The kind of news that we are getting everyday is adding optimism to the markets. The way crude has reacted in the last three months, say around 25% drop from an all-time high, has brought inflation under control. This may lead to a rate cut by the RBI. So all in all, I have never seen the positive confidence of all such factors, which is playing into the markets today.
ET Now: The Nifty has crossed 8300 on a closing basis. The Sensex is just 100 points away from 28,000. Do you see more steam in this rally?
Arun Thukral: Yes, I think so, because if you look at the overall Sensex PE or EPS, we are at around 17 PE and maybe in the peak time, if you look at 2009, it went up to 25 PE. What we have seen so far is a PE expansion, which is a price-led rally, and if we look at other factors – inflation, CAD, fiscal deficit -- we think that corporate earnings are set to improve. When that comes, it will be an earning led-growth and the PE will contract. So I feel that this is a great time for the market.
ET Now: What have you made of the corporate earnings so far, the big boys like Bharti, ITC, Infosys seem to have just delivered?
Arun Thukral: The big numbers are already out, whether it is the banking sector or maybe if you look at the Infosys number or if you look at the Bharti number. Maruti results were great. So all in all, we can see that turnaround. We can see the earnings improving. They have more or less bottomed out and some of them have actually reversed. So that is a positive hint to the market.
ET Now: DIIs have also pumped in a record Rs 4400 crore in October alone and interestingly it is led largely by mutual funds. Would you say that we are seeing the return of the retail investor finally?
Arun Thukral: We have seen a huge increase in the retail participation. In the last few months, after the Lok Sabha election results, there is a huge increase in the turnover. We saw around 10,000 crore were pumped in one month in July. So we were already getting FII flows, which as on date are maybe more than 13 billion. If you look at the retail participation in 2008 when the last rally was there, it was around 65%, which was 65% of daily cash turnover. Now it is around 39%, which dropped to as low as 34% last year. Now it is again on the uptrend. If I look at the number of accounts opening, if I look at the number of new Demat accounts, there is a clear growth pattern. So we are very happy that finally the retail investor is also participating in the India story.
ET Now: What happens to those then who did not quite manage to participate and are now feeling a bit left out? What should their approach be?
Arun Thukral: Many people who wanted to participate were waiting on the sidelines actually now has a fear of losing money. So what we suggest to our retail investor that whenever you have money, you should invest and obviously the retail investor has to follow asset allocation model. If a retail investor has time and if he understands stocks, he should get into quality large caps and midcaps. But if he does not have time or if he does not understand the market, mutual fund is again the route. So, maybe that depends on the retail investor, but the time for entering the market is now. If you have money, obviously we never suggest that you over leverage, but yes, you should put money in Indian equities and participate in the India story.
ET Now: The Bank of Japan’s decision to basically crank up its monetary stimulus seems to have given our markets quite a boost. What did you make of it?
Arun Thukral: The announcement from the Bank of Japan was a welcome move for the markets and that is why we saw this roaring rally. They have added around 30 trillion yen. So, that makes around 70% of the US QE, which is a big number for us. The kind of news that we are getting everyday is adding optimism to the markets. The way crude has reacted in the last three months, say around 25% drop from an all-time high, has brought inflation under control. This may lead to a rate cut by the RBI. So all in all, I have never seen the positive confidence of all such factors, which is playing into the markets today.
ET Now: The Nifty has crossed 8300 on a closing basis. The Sensex is just 100 points away from 28,000. Do you see more steam in this rally?
Arun Thukral: Yes, I think so, because if you look at the overall Sensex PE or EPS, we are at around 17 PE and maybe in the peak time, if you look at 2009, it went up to 25 PE. What we have seen so far is a PE expansion, which is a price-led rally, and if we look at other factors – inflation, CAD, fiscal deficit -- we think that corporate earnings are set to improve. When that comes, it will be an earning led-growth and the PE will contract. So I feel that this is a great time for the market.
ET Now: What have you made of the corporate earnings so far, the big boys like Bharti, ITC, Infosys seem to have just delivered?
Arun Thukral: The big numbers are already out, whether it is the banking sector or maybe if you look at the Infosys number or if you look at the Bharti number. Maruti results were great. So all in all, we can see that turnaround. We can see the earnings improving. They have more or less bottomed out and some of them have actually reversed. So that is a positive hint to the market.
ET Now: DIIs have also pumped in a record Rs 4400 crore in October alone and interestingly it is led largely by mutual funds. Would you say that we are seeing the return of the retail investor finally?
Arun Thukral: We have seen a huge increase in the retail participation. In the last few months, after the Lok Sabha election results, there is a huge increase in the turnover. We saw around 10,000 crore were pumped in one month in July. So we were already getting FII flows, which as on date are maybe more than 13 billion. If you look at the retail participation in 2008 when the last rally was there, it was around 65%, which was 65% of daily cash turnover. Now it is around 39%, which dropped to as low as 34% last year. Now it is again on the uptrend. If I look at the number of accounts opening, if I look at the number of new Demat accounts, there is a clear growth pattern. So we are very happy that finally the retail investor is also participating in the India story.
Arun Thukral: Many people who wanted to participate were waiting on the sidelines actually now has a fear of losing money. So what we suggest to our retail investor that whenever you have money, you should invest and obviously the retail investor has to follow asset allocation model. If a retail investor has time and if he understands stocks, he should get into quality large caps and midcaps. But if he does not have time or if he does not understand the market, mutual fund is again the route. So, maybe that depends on the retail investor, but the time for entering the market is now. If you have money, obviously we never suggest that you over leverage, but yes, you should put money in Indian equities and participate in the India story.
Get Unlimited Access to The Economic Times
