SA Narayan, MD of Kotak Securities sees some interest coming back from the retail desk. He said the retail desk is interested in short-term trade at the moment. He expects markets to remain rangebound in the near future.

Excerpts from CNBC-TV18's exclusive interview with SA Narayan:

Q: Where do you see it going in the May series now after the recent pullback?

A: I think, market obviously in the last three to four weeks has gained good percentage points. From here it will be rangebound and on a pure valuation basis markets today are trading at about 17-18 times 2009 earnings. So from that point of view, I don’t think on a pure fundamental basis there is much left in the market for it to go up. So I think it will trade in the range of 16,750 to 17,750.

Q: What is the sense you get from both the institutional and retail desks in terms of participation and interest now?

A: The retail clients have started showing some amount of interest, but still lot of diffidence as past experience is fresh in their memories. So they are not going to come in a hurry and start buying. The general feeling is that they are not sure whether this will sustain or there will be a big upside from here. So to that extent the participation is very limited and more of a short-term than of a long-term nature.

On the institutional side again if you've seen in the last month, I think the overall FII flows have been limited on a net basis and Indian mutual funds still seems to be sitting on cash and percentage of cash in overall funds still seems to be high compared what it was, which means they are still waiting for the right price where they can put in the money. 

Q: What kind of percentage cash levels do you think the domestic fund managers are holding right now and how much money is on the sidelines?

A: I think it’s maybe 10-15%. I think overall cash level should be in the range of about maybe USD 2 billion.

Q: How worried are institutional clients right now about what is happening across the commodity space, specifically what is happening with crude?

A: Crude is bothering all of us. At more than USD 120/bbl, it’s a matter which is not visible from the inflation point of view otherwise, as it is completely subsidized. But at more than USD 120/bbl it’s differently a matter of worry because it will affect your trade deficit in a great way. If this was to continue for the medium-term, the effect of it will be felt in the economy because the government will find that trade deficit is really going to the point where it is not easy to manage.     

Q: What sense are you getting from the futures market in terms of participation, build up of open interest for May? Has trading interest recovered?

A: As I said earlier, a little bit but not in the same pace. There is a lot of diffidence, people don’t hold on to their positions for long, is more for a day trading or short-term trading. There is no conviction that this overall run will continue and that they can hold on to their position till the end of the month.

Disclosure:

It is safe to assume that my clients & I may have an interest in the stocks/sectors discussed.