The stability of Indian indices depends on government actions and revival is likely to continue only if the weakening rupee stabilises, says Tirthankar Patnaik of Religare Capital Markets.
Religare has a year-end Sensex target of 17,000, but cautions of this target being breached on the downside. He sees Nifty ending this year around 4900.
Patnaik is overweight on IT and pharma stocks. IT stocks may rally further in coming days, so he recommends investors not to book profit now. He is underweight on banking sector.
Below is the verbatim transcript of Tirthankar Patnaik's interview on CNBC-TV18
Q: Do you think the reversal we saw from that 5125 levels yesterday could pull on at least for the next 24-48 hours? We also have those forex swaps announcements from the Reserve Bank of India (RBI), some green in Asia?
A: The answer has to be conditional. If the rupee stabilizes you have something coming up from the RBI and let us see how the domestic market takes it. Oil marketing companies (OMCs) borrow about USD 400-500 million every day from the domestic markets so clearly you are going to see a little bit of support on the rupee in the domestic markets. Let us see what is happening in the offshore markets otherwise and if the rupee stabilizes, you might see the revival of yesterday actually continue.
Q: Are there any impulses in the Futures and Options (F&O) space which might help the market up till the expiry of the contract?
A: Yes, short-term market could swing a bit on the positive territory given we have the expiry today.
Q: You have a year-end Sensex target of around 17,000 and given the kind of deterioration we have seen in the last couple of weeks, do you think you may have to scale that down?
A: There is a chance of this target going down, but we are working out with 4.5 percent gross domestic product (GDP) number, which we are expecting for FY14. We are expecting earnings to be around 5 percent odd this year in terms of Sensex earnings and we are expecting the market to trade at a fair value of about 12 percent.
That will be at a considerable discount to its long-term average. So, that works out to about 17,000. Market do overshoot on both sides on the positive side as well as the negative side so there is a chance that the market could be lower than 17,000. We are just about 1,000 points away from there and given the pervasive negative sentiment that we have here, it is possible that the market could go much lower now, but overall we expect some of the negative sentiment to even out, we would see trade numbers coming better and we have had a great monsoon this year. So, all of these things should stabilise economic conditions as well as market conditions right now.