C Jayaram of Kotak Mahindra Bank said the markets would certainly test earlier lows over the next couple of weeks. "I don’t expect it to seriously breach previous bottoms. Over the next couple of months or so, the markets will settle in a range before one can make any further prognosis."

Here is a verbatim transcript of the exclusive interview with C Jayaram on CNBC-TV18

Over the next couple of weeks we would certainly test the earlier lows, and unfortunately, currently we are only seeing negative news whether it’s on the global or on the domestic front. We are seeing a spate of negative news across sectors, broader macros all of that. So, my sense is that it will test the previous bottoms. I don’t expect it to seriously breach the previous bottoms and over the next couple of months or so one will have to see it overall come down and the markets settle in a range before one can make any further prognosis.

Yes, and they are waiting for a couple of things. First, to get close to the previous lows as possible and also any sort of positive cues from the global markets and I think one would begin to see some short covering and positive investment buying when both these are satisfied.

A lot of aggressive selling by the FIIs is pretty much over and right now one is seeing some peripheral for a selling accentuated by the fact that currently we are trading at very thin volumes. Even one institution coming and selling a half decent amount can bring down a stock pretty badly, so I don’t think this is serious aggressive selling that you saw in October and my sense is that most redemptions from hedge funds, etc. would already have got factored into a large amount, and while there could still be some peripheral selling again it wouldn’t amount as much as what was there earlier.  

It’s beyond just the markets itself and it has got to do a little bit with the real economy. My sense is that when such major sell off started, it was essentially confined to financial markets and there was a belief, partly influenced also by people in government, etc., trying to calm people down by saying that the real economy

is not going to be seriously impacted. But over the last few weeks it is now becoming more clear that the real economy also has a lot of pain and the pain could be much longer than what most people had factored in initially. However, this realization is now spreading across the system and corporate India pretty much recognizes it right now and it is now starting to go down to the next level which is the average man on the street. There is a little more concern right now than what was the case a couple of weeks back.

I would argue that irrespective of what it does to the market clearly from an economy perspective certainly further monetary policy by the Reserve Bank is sort of warranted and it will probably happen over the next couple of weeks. Beyond that at some point of time we are also looking at some fiscal stimuli because while in India one may still have the luxury of sort of being able to do a little more with his monetary policies. Most global markets have pretty much come to the end as far as monetary policy is concerned. So, expectations are that in global markets there would be some fiscal stimuli and at some point of time that hopefully will happen in the Indian economy as well.

The reality is that there would be a period of pain difficult to say how long that period of pain would be but certainly 3–4 quarters of pain. Having said that the good news is that if one looks at the overall balance sheet of corporate India, it is in pretty good shape unlike situations which we have seen earlier in the late 90s, even early 2001–02 when there was a fair amount of leverage by and large across corporate Indian balance sheets. The leverage today is far less. Many of them have cleaned up their balance sheets. So at an overall level, corporate India is in far better shape to go through this period of difficulty as against previous periods when we have had these problems. 

source: moneycontrol