Banks to post 15-25% returns in medium-term: Dawnay Day

Sheshadri Bharatan of Dawnay Day AV Financial Services, believes Finance Minister P Chidambaram's assurance that banking and insurance sector reforms would be tabled in Parliament, has made banking sector very attractive. The current turn of political events has been favourable for this sector, which is likely to see returns of around 15%-25% in medium-term of three-six months time, Bharatan analyses.

Excerpts from CNBC-TV18's exclusive interview with Sheshadri Bharatan:

Q: We have seen 17% rally for last five days or so. Have we see a bit of a top for the near-term?

A: We cannot say that we are in an up-market. In the last five days, we have seen Sensex going up by 2000 points, Nifty up by 17% and we have seen more than Rs 10,000 crore of open interest being created by FIIs. Initial part was more of short covering and later it was long positions. So at this point of time winning the trust vote, Finance Minister's speech on banking and insurance reforms are pushing the markets up. But at same time we have a point of view that intention is one thing but execution-whether they will be able to pull it off- is something that we need to look at.

Q: How much of an upside or legs are you giving to this rally on the higher end?

A: I do not see Nifty crossing 4,750. Last time also the market turned around when Nifty was at 4,700. Sensex should be capped at 16,500 level.

Q: What is the problem with the technology space, it has not participated in the rally and today also that is leading the market down. TCS is down about 7% right now, Infosys is down about 5%, you see this as a good buying opportunity because they have not participated or there are serious problems with the sector?

A: What we saw in the earnings guidance is something that has affected technology sector plus the rupee appreciating is also affecting the technology sector. Today we have seen rupee sharply appreciating, so again that is taking a toll on the tech sector. Banking is one sector that has been beaten down badly in this market and is the sector which will keep the interest alive for investors also.

Q: What about banks, are you buying them right now given the fact that most of the activity that we have seen is primarily on account of short covering on F&O side? What would you be doing with your positions right now?

A: There was a lot of interest in banking sector yesterday because the Left, which used to block all reforms, is no longer there. They have an ally in Samajwadi Party, which would help pushing the reforms bills. Banking and insurance sector reform, as told by the finance minister yesterday, is a good news for the banking sector. So at this point of time, banking sector can see returns of around 15%-25% in medium-term of three-six months time.

Q: Talking about medium-term do you think we will go to 18,000 or there is chance of slipping back to 12,000 level?

A: The market would be rangebound between 12,000 and 16,000.