Markets to be range-bound in 2010: BoA ML

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The week post Budget was a pleasant one for the markets. For the week, both the S&P Nifty of the National Stock Exchange (NSE) and the 30-share index of the Bombay Stock Exchange (BSE) Sensex closed on a very strong note with the big boost from the Budget. Both indices were up 3.5% each.

The two bourses opened on an optimistic note taking positive cues from the global markets, which too closed in the green on Friday.

Commenting on how the markets would pan out to be in the near future, Jyotivardhan Jaipuria Head of Research at Bank of America Merrill Lynch said they would be range-bound in 2010. "The rally further will depend on global cues."

He doesn't see major upgrades in earnings. However, they would continue to move in a narrow range, he said.

Being underweight on the oil and gas space, Jaipuria said, "The reforms in the sector are expected to happen in a slow and steady process."

He is overweight on banks, auto, capital goods and pharma spaces.

Here is a verbatim transcript of the exclusive interview with Jyotivardhan Jaipuria on CNBC-TV18. Also watch the accompanying video.

Q: This post Budget cheer can continue for the market?

A: I think this is going to be a very range-bound market. So to that extent what we are seeing is, one is we had a big correction ahead of the Budget so we are doing a catch-up on that. Second, the global factor will be the key determine this year-you had better global markets, easing concerns on what's happening in Europe-so to that extent we have seen this sort of rally which will again depend more or less where global markets go now.

Q: Did you have to tweak your earnings estimates in any sector majorly for the Sensex overall post the Budget?

A: Overall Sensex there was no big change; we are still where we were and more or less in terms of earnings, it was less than 1%. There were few sectors of course where things went up a bit and in few sectors things went down because the higher tax paying companies got a benefit in terms of tax, some of the other companies which was paying minimum alternate tax (MAT) have got hit because of this.

Q: What about the tobacco sector because that got hit quite a bit post the Budget, did you need to downgrade your recommendations on that sector or price targets?

A: We had to change some earnings there of course because of the excise duty changes so there were some earning changes coming through there.

Q: After this 5% kind of move that we have seen post Budget, you do not think that the market will run away from here. Do you think we are still trapped in that six month kind of trading range that we have been so far?

A: I think largely for this year we are trapped in a trading range. My guess is probably we are going to be plus-minus 10-15% from these levels. So we are not going to see any big runaway move on the market.

Q: Do you think there will be any major surprises in the April earning season which will lead you any kind of serious earnings upgrades because last couple of quarters we have not seen any major earnings upgrades as such post the earnings quarter?

A: If you go back to last March that's where the earnings upgrade phase started and it lasted up to September because analysts had very low expectations of what was happening. After that we have seen earnings being more or less in a narrow range and that's what I think will continue even after the April quarter. The quarter will be good in terms of quarter on quarter growth, but I do not think we will see any major earnings upgrades coming through.