Market to remain rangebound with a downward bias: Kunj Bansal

Do you think both local and global markets are underestimating the impact of this selloff in crude? I mean now technically I can say that water is more expensive than crude. How bizarre is that but that is the real shape of the world. On paper, I can say crude going down is great news for India but that is also a problem for banks, oil companies, oil drilling companies, supply chain and logistics. There could be a serious case of bankruptcy now for a lot of companies.
Just to add to the many factors that you mentioned; while oil going down is broadly considered positive for India, there are other effects to add to those. It is also the fact that we have a part of international trade with the oil producing economies, especially the Gulf. Let us also keep in mind that a large part of Indian diaspora works in Gulf countries and of course they are getting the jobs there. So all these things also come under risk when the oil economies go down because of the oil price fall.

Coming to the impact on the market, the market is currently getting affected by a lot of factors. So we have been seeing the Covid impact continuing on the market right from the mid of February to March fall and now. So that is something that continues. Specific to India, we are seeing the result season starting; so we are going to see the impact of that on more and more individual companies. Now this oil thing has come in. I think what the market is watching is probably to see the more medium-term trend on the oil prices instead of these sharp volatilities which happened intra-day and even inter-day.

So while the broad trend has been on the oil coming down, but the fact that the negative prices or the zero prices are not something which are sustainable and the difference between the various oil benchmarks that is there clearly shows that those are not the prices which are sustainable and that is why the market is not taking those into account. Yes, on a sustainable basis, if the market sees that the oil has fallen down to remain in single digit price, then that is where we will see the impact of oil coming into the market. But as I said, I do not think right now that is the case.

Where do you think this market right now runs the risk of running ahead of themselves? Optimism of a V-shape recovery is slightly over-exaggerated because we are not at bombed out levels. Lot of important pockets in the markets are up 20-30-40%; some pharma stocks even at a 52-week high. So where do you think in this market liquidity has changed the opinion and those stocks do not deserve to come back so smartly or sharply?
So a couple of things. One, of course, it is always difficult to predict the direction of the market especially in the short term; we all know that. But yes, it is our job to keep analyzing the factors and keep trying to think and see what is possible and so that is what we try to do.

Before I try to analyze where are we headed from here, very quickly, last few months’ movement which is already known to us and we had a sharp 40% movement in a period of about a month and that was on the basis of the fact that probably the impact of the virus in economic terms and commercial terms was not being able to be quantified and that is why we saw such a sharp fall. From there, we have seen an equally sharp recovery of almost 20-25%; again within a reasonably short period of time. Now clearly both of these movements fall as well as the rise in the short term; if these kinds of movements happen, they have to be governed more by the money and no more by the demand-supply imbalance and less by the fundamental factors and that exactly has been the case here. Now after having risen 20% from the bottom, the market is trying to find some level taking into account the mix of the slowdown impact of COVID that will be there on the economy and on the corporate and countries.

The fact is that money flow across asset classes has been changing and it will keep changing. Let us also keep in mind that there are not any asset classes that are left. So gold is something that has been going up but at the same time, oil is something that has been coming down; interest rates have been coming down. So the money movement across asset classes is not very clear and in such cases, if money continues to come into equity now or starts to come in a quantum higher than what has been coming in across the globe both abroad as well as in India, then the short-term money supply is something that will start driving the market which as I said earlier seems to have driven the market.

I think the market, if at all I put my head on the chopping block, will now gradually move into a rangebound movement. Having risen 20% plus, probably the short-term trend will be the downward bias but more of it will now be governed by the result declaration of the companies instead of the broader one-way direction or the trend of the market. So that is what I think we should brace ourselves for in the next few weeks.