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C Jayaram of Kotak Mahindra Bank said the market is running out of steam. "It is pushing the upper end of the range. I would be more biased towards a downside from here than an upside."
According to Jayaram, most negatives were factored in prices and that has caused the recent buying. "We see no positive triggers. The market is moving on the lack of negatives. It is likely to consolidate around current levels in the near-term."
Excerpts from CNBC-TV18's exclusive interview with C Jayaram:
Q: Do you think the uptrend is still on or are we pushing against the higher levels or limits of the trading range?
A: I would think so. We are running out of steam around these levels and are really pushing the upper end of the range. In the immediate short-term, there is probably more downward bias than an upward one.
Q: What’s convincing you about that, is it the lack of triggers after earnings season, or do you think valuations are not very compelling from here on?
A: The last set of rise, which we have seen over the last couple of weeks, has essentially been on the back of the theory that most negatives have been factored into the markets. To that extent, the market is due for a little bit of bounce. Other than that, there hasn’t been any positive set of triggers to warrant this rise because the results may not have disappointed but results haven’t been spectacular either. Global concerns still continue on many fronts. To that extent, I would just argue that the last couple of weeks’ rallies have been more because of no fresh negative news. They believe that most negatives have been factored in and that’s not good enough to take it beyond this.
Q: How do you see May panning out ‑- consolidating around these levels or actually giving up some ground?
A: For the moment, consolidating around. Unless you have any fresh negative triggers, either global or local, there is enough set of optimism in the air to keep it trading around these levels.
Q: What about flows, we haven’t seen table-thumping flows, just the odd day of good positive flows from FIIs? What do you hear from your brokerage desk in regards to what global investors and hedge fund managers are feeling about emerging markets at this point in time?
A: They are probably feeling a little bit better than they were a few months back. I don’t think there is a sense of great optimism and certainly no great flows of money coming in right now. So, the mood right now is to wait and look at both the global and domestic scenario for a period of time before committing fresh inflows. By and large, that’s the mood which we sense across the spectrum.
Q: What’s the call on the breadth though? In the last couple of days, we will see a lot of beaten midcap sectors also trying to claw back. Do you think it is sustainable or is it just because the overall market has improved that some of these beaten down sectors are cutting down some of their losses?
A: I would probably go for the latter theory. Some specific stocks or sectors have not really participated. There is a belief that since the overall market levels have gone up, these also deserve to be trading up a little bit. It’s a little bit of that and not any genuine move across the board.
Q: How would you position yourself on the interest rate sensitives now after looking at the Monetary Policy? We have seen a pull back in banks, autos, and real estate. Where do you think they will go on from here?
A: From these set of levels, I wouldn’t be too concerned about rate sensitives. In terms of a monetary policy, the central bank has done as much as it can to try and control inflation through the policy route. It’s evident that going forward, it is more a supply side sort of an issue. To bring inflation under control, you will have to work more there. From an interest rate sort of scenario, I wouldn’t think there could be anything, which is particularly negative going forward. Most negatives have been factored into many of these interest sensitives. To my mind, they seem pretty well poised at this point of time.
Q: How would you rank them in order of preference ‑- banks, autos, and real estate?
A: I would probably rank them as banks, auto, and real estate. Banks are the first beneficiaries of these pull backs, the sector has been beaten down on account of the possibly losses which they have on the forex derivatives side. This was sort of over played a little bit and also because financials globally were not doing particularly well, so they have got hit on more than one time and a lot of those have got factored in.
Real estate is obviously the one which is probably the most contentious because you could argue that the prices haven’t really come off as much as they should on the back of what’s been a pretty bad fall on the markets. Historically, real estate have lagged stock markets and have sort of tended to come off. That hasn’t really happened to the degree it probably should have, so there is a case that probably real estate is still a little shaky.
Q: What is the general sentiment now? Are people feeling a bit more confident after the pullback or are most people seeing it as an opportunity to lighten up. Are they are not very convinced that this will hold for very long?
A: It is a mix of things. At one level, there is a pretty firm conviction that you clearly have pretty strong bottoms at certain levels, you can call it 15,000-15,500. At those levels, you have a pretty strong bottom. That is a firm conviction.
I don’t think there is enough conviction that the market has sort of legs to carry on from here because the belief is that some of this rally that has happened in the last two weeks is essentially on the back of no negative news. There needs to be a broader consensus around the market that there are positive cues to take it forward from here.
Q: So, what is the kind of range you see the market in for the next 3-4 months?
A: I would probably look at a range of 16,000-18,500. That is the kind of range it will probably be in.
Q: Do you see more pull back left in the midcaps or broader market the one’s which have started recovering now?
A: The way it would normally work is if there is not enough conviction. If some frontliners start coming off and if that continues for a fair number of days, then one will probably see some of the midcaps etc also pulling back, but otherwise those stocks probably can be kept at certain levels.
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523.55 3.99%