Aseem Dhru, MD of HDFC Securities feels that the markets are in an interesting stituation, where the FOMC is planning to cut interest rates, while the RBI may increase them. However, "Considering that there is almost USD 500 billion of infrastructure investments that the country is seeking, it is not great time to increase rates," he cautioned.

Excerpts from CNBC-TV18's exclusive interview with Aseem Dhru:

Q: A day ahead of credit policy markets trading rangebound what is your view on the markets going forward?

A: I think we are living the Chinese curse of 'May you live in interesting times'; market is seeing too many headwinds coming from all over - right from the international markets to the FOMC rate expectations and the Indian rate expectations. For the first time we actually might be at a contrarion position because if you look at what the FOMC is most likely to do, it is most likely to cut interest rates by another 25 bps while it is widely believe that the Central Bank in India may actually raise the rate keeping the inflation under check. Already the interest rate arbitrage between the US markets and Indian markets is at a significant high and I do not think it will be good for the markets if the interest rates do see an increase. Considering that there is almost USD 500 billion of infrastructure investments that the country is seeking, it is not great time to increase rates.

I think the effect of the increase in CRR needs to be seen because the second part of it is still coming on May 10.

Q: Are you saying that if the Reserve Bank were to hike rates tomorrow, it would be taken very adversely by the markets?

A: It is not that it would be taken very adversely by the market because the market has largely factored in - both the bond dealers as well as the equity markets have factored in the possibility of an increase. But I personally think that if it does increase in the longer run, it would be a bearish sentiment for the market considering the fact that there is still a fair amount of equity investments that we are seeking in fair amount of projects to go online and historically we have always seen inflation at a high in the first half of the year. So it may make sense to actually wait out all factors are leading to a fall in commodity prices.

Q: How do you immediately advise your customers while there would be these long run red flags we have seen the markets improve even in the US and even a feeling that the Fed after this cut might pause; so immediately what is the advise, you ask people to sell into rallies?

A: The market is going to be largely rangebound in the next quarter and I do not see either a great upside or a great downside from where we are right now. At the earnings level, I think we are fairly there with earnings north of 15% overall at the Sensex basket. I think the equity results that we are seeing of the company is coming in so far is fairly good and some of the fears also have got overplayed both in the global financial market as well as the local financial markets. So I do not see a fall from here. But even if the governor does not raise interest rate, the possibility of raising interest rate is always going to remain in the background. So in some sense if it does come out we have taken the bull by the horns.

Q: You do not buy interest rate sensitives - what are you buying?

A: At the moment interest rate sensitives are certainly not something that are looking good. Pharma is something that we are quite bullish about; FMCG looks good. Contrary to what people believe, power also looks good and so does telecom.