In an interview to CNBC-TV18, Dhiren Sarin, technical analyst, Barclays says he is positive on the Indian market. Sarin says the stress they are facing is not about the Nifty, but more from the France-front.
Sarin is optimistic on the Nifty's performance. "We are seeing a small correction, little bit of weakness and to that vein, I think this trickled effect can get into the Nifty. We see a little bit of a sideways move before we can push higher again. There is nothing to be concerned about just yet. We are still looking higher in the Nifty," he adds.
Below is the edited trancsript of Sarin's interview to CNBC-TV18.
Q: Are you sensing any stress on the Nifty?
A: I think the Nifty is looking quite good on the contrary. We think there is upside in this market. The recent stress we are seeing is not really about the Nifty, it is actually about the CAC 40 in France. If we take a step outside India for a second, the global issues still remain paramount. It's not that the European issues are coming back and the French equities are going to fall, but we have had a very strong rally, a good start to the year. In the near-term, this is starting to falter. We are seeing a small correction, little bit of weakness and to that vein I think this trickled effect can get into the Nifty. We see a little bit of a sideways move before we can push higher again. There is nothing to be concerned about just yet. We are still looking higher in the Nifty.
Q: The big support has come in from the S&P 500 as well which has started the year quite strong, just 5 percent away from an all-time high. Do you think it will take out that all-time high in the next few weeks?
A: The S&P 500 this year has been outperforming the Nifty and the Sensex. So, it is clearly a market leader along with the CAC 40 in France. We are looking westwards to these more major equity indices. The S&P 500 is 4-5 percent from posting all-time highs, very close to significant peaks. For the time being, we keep our focus towards the peaks coming around 1575-1600. So, later this year when we do get closer to that, we think that the market can start to struggle, but for the time being things are looking ok.
Q: Liquidity has been quite ample and some of those old carry trades are back into vogue. In that, how are you mapping the movements in the currencies relative to each other over the last few days?
A: Let us look at the rates market. Yields are just near all-time lows if not at all-time lows across the world. In such an environment, market starts to look elsewhere in the FX asset classes. This is why carry trades are starting to do well. In our view, this is why the yen has seen such a strong bout of weakness while high yielders like the Mexican peso are doing well. Even the INR is doing relatively well. So, we think that that theme is likely to continue in the near-term. Some of our favourites are the Mexican peso, the Turkish lira and in Asia we look towards New Zealand which is a high yielding currency. These are our favourites. On the short side of this trade, one can pick during various moments of time throughout the year either the yen, the dollar or euro because these are all funding currencies.
Q: The surprise performance or strength has come in from the oil and gas category, faces like Reliance, Oil and Natural Gas Corporation (ONGC). Is that what you would back for taking the Nifty to new highs?
A: The oil markets in general are likely to give a boost here. We are seeing West Texas Intermediate (WTI) crude oil starting to push towards USD 100. Geopolitical situations maybe at stake here from what we have seen in the Middle East, but the sentiment has started to improve. In the near-term, we think there could be a pause in this market, but ultimately, there is more upside as the growth outlook continues to improve globally. I do not think that crude oil can actually start to explode higher. What we are going to see is likely a range between USD 85-100 and this range is likely to persist for most of this year.
Q: Gold went through a rough patch. Are you getting any signs that it is beginning to come out of it?
A: The only time we get concerned about gold is when US yields start to rise quite sharply, because then, the markets get another option to pick up yields. However, with yields so low, this is the core story in play here. Lower yields in the US, Europe is driving carry trades as an attractive option. This is also keeping gold buoyant. If gold starts to get up above USD 1,705-1,710, we could see a quick run up to USD 1,725-1,750. It has not happened yet, but it is a move in store in the coming months. Let us watch for that.