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Market likely to correct 5% as macros are a bit worrying, don#39;t rush into NBFCs: Andrew Holland

September 24
13:02 2018

The market on Friday saw a swing of 1,500 points on the Sensex due to rumours of liquidity crunch in non-banking finance companies (NBFCs) that sent DHFL down 42 percent and other stocks in the space lost 5-14 percent.

In the week earlier, benchmark indices corrected more than 3 percent while the BSE Midcap index lost over 4.5 percent.

Today also, the market opened in the green but immediately wiped out those gains to trade more than half a percent lower.

“Issues for financials might be larger than we anticipated. Even joint statement from RBI & SEBI could be due to things being a little worse. The story is unfolding in terms of selling by mutual funds due to redemption pressure, rumours are mostly on bad side than good,” Andrew Holland, Alternate Strategies, Avendus Capital told CNBC-TV18.

Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) said on September 23 that they are “closely monitoring” activities in the financial markets and were ready to take appropriate action, if required, following a sharp meltdown on September 21, in equity and debt markets.

The regulators came out with separate, but identical statements amid apprehensions about steep volatility in markets on September 24.

Against the backdrop of debt defaults by diversified IL&FS Group, there are worries about non-banking financial companies (NBFCs), although the country’s largest lender State Bank of India (SBI) assured lending support to the NBFC sector.

Finance Minister Arun Jaitley also said on Monday that the government would take all measures to ensure adequate liquidity for non-banking financial companies (NBFCs) and mutual funds.

NBFCs

Andrew Holland said the research house will be looking at quality NBFCs. “We will wait & watch for entry points for good NBFCs but NBFC is not a sector to rush into currently.”

One should just sit back and watch it before looking at entry points, and investors who have exposure to this sector, better let this noise go on and settle it, he advised.

On Yes Bank, he said there is a lack of clarity on MD & CEO Rana Kapoor’s exit.

Rupee

Macros are scary at this point of time as consistent fall in rupee and rising crude oil prices are major cause of concern.

The rupee is going to be pressured in short term, which is problem for India Inc.

He sees 5 percent correction in market and advised that let the rupee stabilise. He expects pressure of interest rate being hiked on companies which have taken external debt globally.

He said the research house has raised cash levels in the funds and is waiting for right entry points for deploying cash.

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