Devesh Kumar, MD, Centrum Capital, sees Sensex between 15,000-16,500 in the near-term and expects markets to consolidate in next 3-6 months. He is concerned about interest rates, reversal of FII flows and the impact of US slowdown on the markets.

He expects global bad news to end by month end. Centrum expects Sensex to hit 27,000-30,000 levels by 2010.

Excerpts from CNBC-TV18's exclusive interview with Devesh Kumar:

Q: Do you sense that participation is coming back now?

A: At this point of time, people are not yet very comfortable so on the margin right now, people are getting slightly positive, but this doesn’t mean that the trend is going to continue in the near term, although in long term we are positive.

Q: What’s your sense of how things may pan out for the next couple of months? Do you think the markets’ bottomed out and it's time to move up and will it succeed in moving up you think?

A: I was in Singapore last week and I found that everyone has turned bearish, which is a very good sign for a beginning of a bull run. Whether it begins in a month or two, we don’t know, but in order to contain inflation, interest rates may be hiked or there may be a more restrictive monetary policy. In the past, restrictive monetary policy has failed to contain inflation which is a supply side issue. The worry is definitely there, inflation is quite high and it's not going to come down in near term, but sometimes people’s expectations goes in linear direction and they are expecting that inflation may go up further. From political administration we have heard that they will not hesitate in curbing growth in order to contain inflation, growth is the only remedy for inflation. If your supply improves and that will lead to inflation coming down, all this has created a very uncertain environment as far as the market is concerned, but when I look at the longer term, that is 2-3 months ahead, I believe that things are not going to get worse from here, things will either stabilize or improve on the margins. Our view is that inflation rate will come down below 5% levels by 2010, elections will be behind us and hopefully economic administration will take a front seat. In the US, the worse is probably going to get over in a months’ time and two years from now the US might not be looking that scary. We see a conservative but 20% CAGR in the Sensex’s earnings for the enxt two years. Based on all this, our Sensex target will be between 27,000 to 30,000 for 2010, which means that the index is going to double from the current levels, which is very positive, but this realization will sink in slowly and the market will respond to this gradually.

The right strategy at this time for investment in markets will be to take a two-year view, put money in market unleveraged positions for long term investors and as and when your target price is reached, book and again wait for some panic, and then make an entry. So this should be the formula, but unfortunately people try to catch absolute peaks and absolute bottoms which never happens.

What we feel is that you take a longer term view, even if the market goes to 14,000 and then bounces back to 30,000, you will make your money and that’s the approach one has to take today.

Q: When you say people are bearish what does that imply for the India position? Are they just sitting on more cash, have they been selling out, what have they been doing these past few weeks?

A: What we have seen is wherever the fund performance in the past was good, and recently they have got hit by the recent fall, it has given more money to such funds. But wherever it was over leveraged and wherever value distraction is large, they are in difficulty. What we feel is funds are in cash and they are hesitating and investing in a big way at current levels. But I think if markets rise up by 1,000 points, everyone will like to catch onto this rising market and that will fuel up the run up again.