Vikram Kotak, CIO, Birla Sun Life Insurance said that the market is going to trade in range between 15,000-18,000 for the next four-five months. He expects inflation to stay in the range of 7-8% for next 3-4 months and sees a lot of regulatory action with the elections coming near. Kotak does not see the market breaching its previous lows.

Excerpt from CNBC-TV18’s exclusive interview with Vikram Kotak:

Q: Do you think the market has met its recent high? Are you seeing major losses from current levels?

A: The market is going to trade in the range between 15,000-18,000 for the next four-five months and there will not be more than 15% movement here and there. This may be on account of the slowing earnings growth. Inflation is going to stay in the range of 7-8% for the next three-four months. One will see a lot of regulatory action with the elections coming near; commodities banned or import-export duty kind of measures which is going to stay around.

Liquidity is going to remain tight and the RBI is going to play a role on the monetary area. So, the market will not go anywhere, it’s going to stay between 15,000-18,000 range. It's a little bit of a downward bias.

A: I don’t think markets will go beyond the previous lows. If one looks at the growth in inflation mix, a lot is attributed towards inflation. Most of the poison which was there in the system on over leveraging or people who were overbought, is already out and markets are very light. So, I don’t think it’s going to fall too much. Only you may have liquidity driven selling and some FII selling. Otherwise, I don’t see a major retail position setting in the market right now.

A: We like sectors like banking. In banking, most of the bad news is priced in; if one looks at the valuations, banking is available at close to half of the valuation of what we have in China or emerging markets.

I think banking is quite a good sector to stay around forever.I think auto also is a sector with a one year view if one wants to stay around in the system. It’s a good time to build a long position on the auto because the PE multiples, which we have today in the auto side, is around 8-9. If one looks at Sensex PE which is 17 times, there’s nothing to lose much in that area.

In short-term, we see the IT sector also doing quite okay because a lot of positive news story is built-up around the IT sector, whether it’s the Software Technology Parks of India (STPI) benefit or the numbers which were given by most of the companies and the lower wage hike. So net-net IT sector will stay in momentum.

A: We are not very positive on the real estate sector, because we are not happy with the accounting policy and nor are we happy with the way the sector has been driving.

If one wants to play housing one can play though mortgage finance company rather than playing through the real estate sector.

A: Yes, I think the levels are going to be at 780-810 for the next six months or so, because the inflation pressure is not going to go away in the next six months. You will have a continuous borrowing pressure as well as the Market Stabilisation Scheme (MSS). When the RBI requires the MSS to manage liquidity, they will come in the market and try to have more options. Also there is one more supply which is coming from the food, fertiliser and oil bonds segment. So net-net we don’t see yields going to either side in big way.

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