Real estate bet is for risk takers: Gautam Trivedi, CEO, Religare Capital Markets

In a chat with ET Now, Gautam Trivedi, CEO, Religare Capital Markets, says it is not liquidity alone which is keeping markets above 8600 level. Edited excerpts



ET Now: Patchy earnings are borderline weak but the gush of liquidity in the market continues and that is quite surprising. Guess that is the only reason why we are currently at above 8600?

Gautam Trivedi: No, I think there are a multitude of reasons why the market is where it is today, liquidity of course being one of them but I think there are four other factors which are equally important. The first and foremost is the monsoon. Clearly this time around, the monsoon has been very good and touchwood it seems to be reasonably widespread across the country with the exception of some pockets like Gujarat where it has not rained as much.

The second is the expectation of the Seventh Pay Commission and how that will potentially unleash an estimated Rs 2.5-3 lakh crore over the next two to two and a half years of a effective fiscal stimulus. As a result, almost 20 million people would be positively impacted. That is a sizable number of people among whom this wealth is going to be spread and obviously that will result in a significant purchasw of two wheelers, Maruti or at least the lower end cars, consumer products and so forth.
The third reason is the GST. This is now definitely a much bigger reality versus than what it was 12 months. So assuming that it does get passed either in this session or the next, that will be a medium term positive for the economy.
I think the fourth factor is something which I have been discussing with both domestic mutual funds and FII investors, the fact that the new or incoming RBI governor whoever he or she is who will invariably be cutting rates and that is the expectation which a lot of people have, so you have essentially four things going for along with the liquidity and of course liquidity is a function of these four. So as a result we continue to remain positive on the market.

ET Now: So you have outlined the key factors to watch out for what we have seen and we were just discussing about this in the morning. There has been a substantial rise in the interest in PSU banks as well as PSEs. The Nifty PSE index has rallied almost 20-25 per cent from the recent May lows and I am just trying to think that the only people who bought in the last 20-25 days have been the FIIs. The DIIs have been virtually net sellers every single day. Is there a substantial foreign and local interest coming back to the PSU sector as well?

Gautam Trivedi: We have not really seen evidence of foreigners getting excited about the PSU banking space if that is your question. I was recently in the United States met over 20 investors and overall appetite for the banking space pretty much remains limited to the private sector banks Kotak Mahindra, HDFC Bank of course, IndusInd and Yes Bank. I think the overall appetite even for Axis and ICICI at this point seems limited but when it comes to PSU banks at least we did not see any evidence of virtually no interest whatsoever in the PSU banks. So, I do not think the FIIs actually have been buying the PSU banks.

ET Now: A lot of the under-owned underperforming spaces are seeing substantial invested interest. If OMCs have been the story for the past one-one and a half years, now we are seeing a resurgence of real estate. For example, DLF yesterday was at 52-week highs and that is the largest real estate company obviously we are seeing some substantial interest as well we have seen that happening with the lot of midcaps which have posted reasonably good numbers compared with the previous quarters and are seeing sustained buying interest as well, what is your advice to your large clients when it comes to the companies which where hitherto underperformers but starting to perform?

Gautam Trivedi: I think you got to be careful with names like real estate or infra who have been underperformers. Jayprakash has more than doubled from its lows. The question is, is it really out of the woods? I do not think so. In fact, its stock going from Rs 6 to Rs 12 should not really get anybody really excited. So I think there is an audience for that and risk takers who want to bet on it. I wish them all the best but one does not know if the overall institutional interest within it is for real.