Mkt to remain rangebound but downside protected: Jaipuria

He says parts of the inflows are due to arbitrage funds and ETFs. Asian shares paused on Friday as investors took stock of a four-day rally driven by optimism, yet to be borne out by action, that authorities will soon take the steps needed to ease concerns over the eurozone's debt crisis and weak growth.

Jaipuria says the market has now moved closer to the top end of the range. "The market probably needs to correct a bit if you see the macros, growth data, which has come in adverse. So, we will probably get a pullback," he told CNBC-TV18.

Going forward, he expects the central bank action to restrict downside in equities.

Also read: Liquidity keeping market afloat, macros remain poor, says Udayan

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.

Q: The macro newsflow has been awful to say the least. But, so far, liquidity has kept us afloat. Do you think it might continue to going forward?

A: I think market is going to remain rangebound. It is not going to run up anywhere. At the same time, the downside is pretty protected with a bit of liquidity and a lot of hope. The hope really is that things are so bad that, at some point, the government will move. We will have reforms happening. So, things can start changing twelve months down the line. So, I think it is still a very rangebound market. We are not going anywhere.

Q: Do you think the kind of macro newsflow that we are seeing with crude going back to USD 114 per barrel have raised the risk of downsides opening up?

A: I guess we have moved closer to the topend of the range. If we see from where the market started, the big move came in. We are up 10% from the lows, which we had in May. Most of it was triggered by crude falling off.

Crude now is, more or less, coming back to the old highs. If you look at it in rupee terms, it is probably very close to the highs. So, to that extent, I think the markets probably need to correct a bit.

If you see macro, you see growth data, it has come in adverse and so has earnings data. So, to that extent, I think we probably will get a pullback in the market. The hope is that central banks will play a role. That is what is keeping global markets afloat, that is what is keeping the Indian markets afloat.

Q: What sense do you get of this liquidity that has come in? In August, we have got a billion dollars in cash market, what kind of funds are buying?

A: Part of this liquidity is arbitrage fund. So, it is not liquidity that is coming in the market because people do sell-off some position in the future market against it.

Part of it is coming from ETF. So, I would think a lot of it is arbitrage and ETF money. On the margin, then there are probably long-onlys who have adjusted the India weight a bit or they have seen some inflows and they have put in money into India.