What is your take on the entire US-Japan trade deal that we have seen? Trade and tariffs, especially on the US front is something that you have been following for a very long time. What is your quick take on that?
Ajay Bagga: Yes, it is a very pleasant surprise and a very welcome move. We have seen the action happening across Asian markets. Even though Europe opened up, Europe is also in a celebratory mode. Directionally, it is pointing towards more deals coming and hopefully Europe and India both will be able to get a deal done. Overall, 10 days back, it looked a very dismal picture as far as Japan was concerned. In fact, President Trump issued letters to Korea and Japan, levying 25% tariffs on them. Japan went into elections without a deal and if this had happened last week, maybe the Liberals would have got a better outcome in the upper house elections. They lost the majority in the upper house and one of the reasons apart from inflation was this policy uncertainty leading to corporates being very uncertain in terms of fresh investments and consumers being very uncertain about safety of their jobs.
So, timing-wise, the Japanese prime minister must be wishing that if the deal had come last week, it would have helped him a lot. Overall, it is pointing towards a more reasonable level of tariff coming onto major trade partners. So, Europe, for example, anything from 30% to 50% Trump has been talking about, but it will settle nearer to 15%. India has also discounted a 15% overall and the way the UK-India FDA has worked out, we might get something like that with the US as well with foreign cars coming in at a very reduced 10%, opening up some of the agricultural produce where we are already importing from the US and also a lot of goods being opened up.
The UK deal is giving some ideas. As is the Japan deal. With Indonesia, Philippines, and Vietnam having cracked deals, Malaysia and Thailand are now looking at cracking deals this week. Korea has sent a delegation to the US. So, hopes are high and it will be a very strong catalyst for our markets. It would not happen by the 1st August deadline and the next two days are critical because the US customs will need about a week to update their computers with the new tariff deal. So, nothing will happen after 25th July.
The next 2-3 days are critical. We will get some news flow, some deals happening. India will get one month more and September 2 is the date for the Russian oil decision as well. So, probably India will get shifted to September 2 and when the Americans are here next month, probably we will get some kind of a deal coming on board.
What are your views on the liquidity mopup that we have seen in the economy at present in terms of this QIP that everyone is talking about, in terms of promoter stake sales coming in and also block deals. What is your take on the liquidity mopup that we have seen in the economy at present?
Ajay Bagga: It is amazing that institutions and promoters have been lightening their holdings and the Indian retail via the DIIs which have been absorbing all of it. So, quite remarkable. Normally we would be worried when insiders are selling. They obviously are the most well-informed about the health of the companies, but this time around, we have seen promoters selling off nearly Rs 150,000 crore in QIPs, and OFS (offers for sale) coming in.
So, the good news is there is a lot of liquidity in the market which is absorbing both primary offerings in the market with a lot more IPOs being scheduled for the second half and this promoter selling that we have seen has not had a bad impact on the market. Yes, if it was not there and this Rs 150,000 crore was coming into the secondary market, we would probably have crossed the September all-time highs already. So, it has just been postponed. But the good news is that the impact cost has not been that high.
For a week or so, we see some impact on the stocks and then fresh buying starts again. So, it is a function of the elevated valuations where promoters are cashing out some of their chips but there is retail money on the sides which is absorbing all of it.