Crude to cool off to $120-100/bbl in a yr: Centrum Cap

Devesh Kumar, MD, Centrum Capital sees crude cooling off to USD 120 - 100 per barrel in a years time. He feels that with oil prices easing the pressure on the balance of trade and current account will reduce significantly. He expects the GDP (gross domestic product) growth to touch 9% in two years and said that the macro growth numbers is not too much of a concern.

Kumar said, "In the given headline numbers situation, one has to pick winners. At the current juncture, all interest rate sensitive sectors are companies that should be averted." 

"I would caution investors to avoid investing for 6 months because in the next 6 months, the news flow could become slightly bad and the market may or the stocks may fall 5%-10% from here. But if you are taking a 1-2 year call, then the chances of getting a 35%-40% returns from the current levels looks highly probable," Kumar added.

Excerpts from CNBC-TV18's exclusive niterview with Davesh Kumar:

Q: What’s your take now, after observing all what has happened in June and July, where do you think things are headed from here?

A: There is panic and a sense of fear prevalent in the market today and this is explained in the high level of cash that a lot of funds and individuals are sitting on. People have money but they don’t want to put it in the market, fearing that they may get hammered further. If they buy today then, they may suffer some more pain on an MTM basis. If one looks at the current domestic situation, all the bad news has been priced in. We are suffering today because of the transmission of the global pain into India.

Oil is going to be a very critical factor and we feel that in the next 10 days prices would be tough. But based on the movement in the previous 10 days, it is clear that traders are calling the shorts today and crude may peak and breaching the USD 150 per barrel levels would be tough. There therefore, would a sense of relief when we see oil cracking from here and moving towards the USD 120 per barrel and USD 100 per barrel mark. Over the next 12 months, I would not be surprised if oil is near USD 100per barrel to USD 120 per barrel.

So if I look at the macro side of the Indian economy, GDP growth may come down to 6.5% in the worse case scenario. Over the next two years however we may see growth go up to 9%. So broadly the macro side growth numbers are not going to be too much of a concern.

With oil easing and the chances of Reliance and Cairn energy gas meeting a lot of our energy demands in the next 12 months, we feel that the pressure on the balance of trade and current account will reduce significantly. The outflows by the FIIs are not going to worsen from these levels. In the next 12 month, once political stability is restored and elections are behind us, there will be a good amount of money coming on the FDI front.

On the external front, we may see Rs 45-47 to a dollar in the near term. But the 12 month currency window again has strengthened. The RBI has succeeded in reducing our growth numbers as industrial growth has suffered without being able to handle the inflation part. Inflation is global in nature and I hope we would focus on growth. So as we move towards 9%, that concern will also be addressed.