Saurabh Jain, Head Research (Equity) - Retail, SMC Global Securities spoke Puneet Wadhwa on the markets.

 
The markets have seen a range bound trade in August. What is the outlook for the remaining part of FY11?
 
The reason for the range bound movement in the market was lack of clarity on the recovery process in major developed economies.
 
In U.S., the pace of output and employment continues to remain at a slower pace indicating moderate recovery. In Europe too, the situation is not encouraging, and China, Japan are also facing growth issues.
 
I think for some time now liquidity would remain in the financial markets as some major economies are still resorting to expansionary monetary policies in order to stimulate economic expansion. India per se is witnessing more promising growth.
 
Overall, I think we may soon experience good credit off-take with the start of third quarter, as investment activity pace would accentuate after monsoon. Inflation, a major worry factor, is likely to subside as the supply side factors would be addressed with the good crop season.
 
So, all in all, I believe the sailing would be smooth in the current financial year as far as domestic growth is concerned, but concerns over global recovery will continue to be there in investors mind. 
 
Do you think that we can scale up to 20,000-plus levels by end of the fiscal? What, in your opinion, are the likely triggers?
 
The trigger is domestic consumption with huge expenditure for creating infrastructure. If you see the discretionary sectors have performed well in the recent run up in the markets.
 
With disposable income growing at a decent pace, people urge to own a car or say refrigerator has grown remarkably. The sentiments have really improved this year and industries, consumers and even investors look more confident. So, I guess scaling up to the 20,000 mark is quite possible.
 
What are the likely factors that can pull down markets? Any sectors that should be avoided at this juncture?
 
One has to see that the recovery processes in the different part of the world are not synchronized. If one country is experiencing moderate recovery with benign inflation, the other is witnessing good growth with high inflation and so are the policy actions.
 
So, there are innumerable reactions and outcomes of the actions that are being taken by policy makers in different countries. However, if recovery gets derailed it can surely clamp down markets.
 
What are the chances of a double dip recession?
 
I don’t think there would be a double dip kind of situation, but yes there are still some patchy roads ahead.
 
I think policy makers are quite proactive and seeing the situation closely. Recently the U.S. Federal Reserve (Fed) made a statement that they would do anything to make sure recovery process continues.  I think it’s a matter of time that economies do take to respond to the policy actions.
 
What strategy are you adopting in the current market conditions?
 
Our advice is to still remain invested and cash in on any opportunities by buying stocks in any correction. However, we are keeping a close eye on the liquidity and news flow from overseas.
 
What is your view on the new DTC norms specified recently? What is the likely impact on India Inc as a result of changes in the corporate taxes and MAT?
 
Considering the limitations with which the government has to handle they have done a fairly good job. This is a step towards simplification and rationalization of tax provisions in India. While some segments of people still express their dissatisfaction, it is very difficult to keep everybody happy.
 
Regarding MAT, the government has taken a sensible decision keeping it as a percentage of book profits instead of as a percentage of gross assets as proposed in original draft. Had it been on percentage of gross assets, it would have discouraged Indian corporate in asset creation and capacity building. Overall, it is viewed positively.