Shanti Ekambaram, Director, Kotak Mahindra Capital, expects the markets to trade rangebound in the near-term depending upon global and local events. She is bullish on infrastructure, consumer goods, and financial services sector. 

Excerpts from CNBC-TV18's exclusive interview with Shanti Ekambaram:

Q: You are a long time watcher of the market and of macro economic trends. Considering your penchant for money and finance, do you think we are missing something in terms of ignoring inflation cues, crude at USD 126 per barrel, steel touching all-time highs, and metals having not quite subsided from their near-term highs? Is India in particular and maybe the emerging markets in general likely to become a casualty to some inflation dangers?

A: The changes in the macro economic landscape actually has been quite sharp over the last few months and the price of oil is likely to cause much more damage than what we are able to see right now. If you look at the way the rupee has moved, you are really seeing the impact of high payout on account of oil and the almost drying up of capital flows. We may have seen it just for a temporary phase in maybe a month or so, but there has been a dramatic movement that has happened in the rupee.

From a macro-economic trend, we are seeing high inflation and probably slowing of growth. You could see some amount of dry up of flows. It is not really adding up very much, at least till we see the change in the price of oil. Assuming that this remains for the next six months timeframe, you are likely to see an impact probably more than what we are seeing right now.

Q: From an equity market point of view, what is the best and the worse case scenario that you are working with for FY09, given that some experts are talking about the market being largely ranged and some are saying that given these global concerns we probably might get a peg lower and re-test the lows?

A: The markets are likely to be rangebound. Global cues are going to continue to be volatile. I don’t think the last word has been seen in either the kind of pain that is coming out. It will take some more time from the US economy to recover. Closer home, we have to look at factors with the trade off in inflation and growth and somewhere growth will get impacted.

If oil continues to remain like this, you will see a slowdown in growth and a pass on in prices. You would see higher inflation and it will start impacting corporate bottom lines, whether it is in the form of higher inputs or increased interest rates and other mechanisms. We have to wait and see where oil goes and that could probably make a big difference in the emerging market economies and financial assets.

Q: If that is the world view at this point in time in terms of stock markets, then where does one hide, does one get into debt, or defensives? What are the sectors within equities or outside equities as an asset class that you would recommend?

A: In the medium- to long-term, equity as an asset class must be in everyone’s portfolio. One should start looking at select stocks and sectors but from a longer-term perspective. If India has to happen, infrastructure has to happen and I don’t think there has been slowdown in any activities. If you are still seeing infrastructure activities all around you and if India has to happen in the long-term, then the consumer play has to happen.

While you may see a slowdown in demand and temporary blips, from a longer-term perspective we still are a country of over a billion people with expanding wealth. So, the consumption story will play out over a longer-term perspective. Financial services is the back bone of any segment, so these are long-term plays.

From defensive plays, you have to go to other sectors like pharma or others who would give you the short-term sort of play, but India is a long-term story that one should bet on and live with the fact that markets are likely to be rangebound in the near-term.

Q: What is the range that you are defining for this market? Are you saying it is going to be rangebound? What are the levels that you are looking at?

A: It is difficult to really quantify because the market dynamics are changing so fast. For example, we have seen ranges goings down all the way down to 14,000 and all the way up to 17,000. So, maybe around 15,000-17,000. I would not really go and quantify levels. I think it would be rangebound depending upon global and local events.