Sensex can cross 19K, but watch out for surging oil prices: Kotak

“The Sensex can cross 19,000; we are still talking about those levels,’” B Gopkumar, executive vice president and head of broking, told Firstpost in an exclusive interview on Tuesday.

At the moment, that looks like extremely likely. In a startling turnaround from 2011, foreign investors have been extremely bullish on the India growth story since the start of this year, investing a whopping Rs 25,000-30,000 crore in the markets. That can primarily be credited to the European Central Bank, which late last year, injected 500 billion euros through a scheme that allowed banks to borrow unlimited funds from the central bank at cheap rates. A second round is in the offing, and could unleash another 500-700 billion euros into the system.

Nevertheless, there is one countervailing force – high crude oil prices –which could act as a damper. Gopkumar acknowledged as much, noting that a crude oil price above $110 a barrel is not something “the markets are comfortable about”.

The surge in oil prices has already prompted the International Monetary Fund to flag oil as a rising threat to the global economy.

In terms of Budget expectations, a reduction in the securities transaction tax (STT) by 30-50 percent could also provide a boost to the markets, said Gopkumar. A lower STT will lead to more arbitrage opportunities and increase trading volumes, he added.

Lower interest rates could also lift sentiment. Currently, high interest rates are a big concern for Indian businesses, which have largely scaled back their investment plans as a result.

“After all, who wants to borrow at 13-14 percent?” he asked. However, it remains to be seen how far the central bank will be able to cut rates given surging oil prices.

Overall, however, Gopkumar said he did not have high expectations about the budget; he said he didn’t expect subsidies to be cut too heavily either given that next year is the last year before elections, which is when governments typically indulge in freebie spending.

“I expect this Budget to be a non-event,” he said.

Gopkumar spoke to Firstpost at an event in Mumbai to launch’My Box’, a ready-to-trade box from Kotak Securities that allows investors to open a trading account instantly.