Portfolio Manager, PN Vijay feels that at the moment, markets are slightly bearish. But he thinks, the last week was the most interesting week in the markets, globally. Commodities crashed out, but it was a great week for US earnings. So, he says, a lot is happening in the US, but India is still in the gloom and doom mode, probably because of inflation.

But Vijay said, "If the economy can maintain inflation at 5%, we'll grow at 9%. So I definitely don't approve of the gloom and doom mood."

Excerpts from CNBC-TV18's exclusive interview with PN Vijay:

Q: What are you making of all the macro data coming in; first, the IIP aberration, now the inflation numbers, the credit offtake numbers, they are not looking very comfortable. What do you think the markets will make of it?

A: I think these are slightly bearish, though we will have to see the level of seasonality in the inflation numbers. Last week was perhaps the most interesting week in the stock market in the whole of 2008 and I think it needs to be studied closely. The commodities just crashed out - 20% gold, crude, all the major commodities just came down and we saw great week for equities in the US; 3.5% Goldman coming with nice numbers, Lehman Brothers coming with nice numbers, Morgan gave a nice statement. So a lot is happening in the US; most of it positive.

In India people are still in a gloom and doom state of mind probably because of inflation. My own perception on this is that India is a 14% nominal growth country and we have been doing that in last four years in a row. So if inflation is around 5% we will grow at 9% (it’s at 5.92%). But my sense is that if commodity prices globally continue to fall and we get the seasonal Kharif crop in April, inflation should come down to about 5% with a little base effect from second week of April, then we can see a huge rally in the markets. So I definitely don’t share the gloom and doom of the market, I think that's the real inflection point.

Q: What’s going on with the breadth of the market? The Nifty is doing its flip-flops, but the breadth is just grinding and midcaps are losing even more value. Why is this happening you think?

A: Breadth is not so important in these times, because it’s students and housewives who give the breadth to the market and they adjust out of it. We need good money coming in from FIIs and the domestic investors who have the confidence and who can see six months ahead. If they keep buying for six-seven days in a row, the breadth will come in because it’s a serious crisis of confidence among retail investors. They keep seeing charts and keep selling, so I am not at all surprised with the smallcaps and midcaps. But I don’t read too much into it; once we see some serious buying coming from the large investors that will get corrected. 

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