Expect Nifty to hit 5700-5800 sometime this year: Ambit Cap

Andrew Holland, chief executive officer - equities, Ambit Capital feels that operation twist extension will not serve the purpose of aiding the US economy .

"The ongoing operations will have a margin effect as well. In fact the Fed downgraded forecast for the year quite significantly. I don't think markets are going to take that too well," he said in an interview to CNBC-TV18.

The next key trigger for global markets would be the outcome of the European Unit (EU) Summit. Holland is hopeful of the EU obliging the markets with a resolution to the euro zone debt crisis.

However, if the EU summit fails to cheer the global markets like the Fed, then one would see a global sell off pushing markets to December lows.

Meanwhile, he expects Nifty to test 5,700-5,800 levels sometime in this year.

Below is the edited transcript of Holland’s interview with CNBC-TV18. Also watch the accompanying video.

Q: How would you approach markets now, would you be buying here or do you think you will get a chance to buy around the December lows again?

A: We have had kind of shot in the arm, a liquidity fix overnight and it soon starting to ware off. I mean operation twist has done nothing for the US economy and the ongoing operations will have a margin effect as well. In fact the Fed downgraded forecast for the year quite significantly. So, I don’t think markets are going to take that too well.

We are going to our next liquidity fix, which is the European meetings next week and summit. There is so much confusion unfortunately because you have so many European finance ministers saying what they want to say, within minutes markets react into positive and then negative news as Merkel says, no, we are not going to do that.

If we don’t get any kind of resolution from the European Union, the markets could test the lows of December because a global sell off will probably come. We are all hoping, we are all waiting for the liquidity fix in Europe now to keep it going with more optimism.

Q: Would you treat that correction as an opportunity to buy or is it your belief that this correction in markets so this bear patch is likely to last much longer than one expected going into next year as well?

A: For our funds we are sitting on quite a bit of cash and the reason for that is the big EU meet next week. What I would be looking for would be recapitalization banks not just in Spain, but Italy and possibly France along with some bond buying programme. I think that would be what the markets would see as being very positive, it would give them at least some respite.

That would trigger off a good rally in the short-term with liquidity being the main driver. I don’t mind buying into that, but if I am wrong and we get nothing from Europe then markets will test the politicians’ nerve and start pushing prices down again and if you get to those December lows, I am a big buyer.

So whichever way I am looking at it, I am looking at the buying trigger - I am just not saying that the European Union, I have no faith in the European Union to give me that next week, I will have to take a big call.

Q: We haven’t lost any significant amount of money at least in terms of FIIs and yet the rupee is standing below 56, how big a deal or a problem do you think the currency will be in the second half as well for a market like ours?

A: It depends on what we see - I mean hoping that we are getting stability rather than anything else. If the government as we keep hoping and praying for will do something more positive, then you could continue to see inflows. Given where oil prices and commodity prices are today, I think that is the positive for flow.

We could see the rupee strengthening into the second half of the year as we kind of get through this risk-off trade, which we are seeing at the moment. One of the indicators we look at is obviously where world commodity prices are. Unless we start to see a big run up in commodity prices ahead of that European meeting then maybe the expectations we have of European Union doing something spectacular will be off the table again.