The market may correct to levels as low as 4900 over the few weeks, but is likely to bottom out in September, believes Amit Rathi, managing director, Anand Rathi Financial Services.
Speaking to CNBC-TV18, Rathi says the possibility of the Reserve Bank of India (RBI) easing rates and launch of a sovereign bond issue apart from the Fed tapering will be the big triggers to lead the market.
Additionally, Rathi says private banks still look better than public sector banks and HDFC and HDFC Bank are strong buys if they correct five percent more from their current levels.
Also read: Nifty to end 2013 near 4900; IT may rally more: Religare
Below is the edited transcript of Rathi's interview to CNBC-TV18.
Q: We have seen 5,125 holding out for the moment, do you think that looks like a bottom at all or is it just something that we have bounced back for the week or for the contract?
A: It is difficult to call in the next few days. Maybe today the market might recover but over the next few weeks, it could drop more than what most people expect.
Q: What kind of lows are you looking at for the year-end itself? Do you think there is a lot more to go from current levels? There appears to be a consensus around that 4,900 mark?
A: The market may go below 4900 over the next few weeks but our year-end target is much higher than that. September will mark the bottom of the market. We are seeing a lot of triggers coming through in September. What is in the Reserve Bank of India's (RBI) control is the stance on interest rates. If they start loosening easing liquidity, lowering rates once the currency stabilises, that will be a big positive. We are also looking at the government potentially launching a sovereign bond issue that will also help stabilise the rupee. In September also, we would have the Fed’s actual action on tapering coming through.
Q: I wanted your view even on earnings, what is consensus at when you look at FY14 earnings and even FY15 and what do you think it could get scaled down to?
A: For FY14, our consensus is low single digit. So, our estimate is 5-6 percent. FY15 also seems weak. If we manage 8-10 percent earnings growth, that will be great. Investors are starting to look beyond FY15 as well. We are looking at low gross domestic product (GDP) growth both for this year and for next year. However, investors are starting to focus on FY16 and looking at the medium-term to long-term trajectory because that is where value buying will come in.