See Sensex at 22000 by year end: Deutsche Bank

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » RELATED NEWS Why is Bowen Capital bullish on NBFC stocks? FIIs investment in 2010 seen at USD 30 bn: Morgan Stanley Nifty may slip 7-8%, PSU banks to get hit: Infina Finance ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 01/06/12 Are Mutual Funds betting on Nifty?

Today, the Sensex closed at 18038.25 up 39.84 points or 0.22% and the Nifty ended up 6.75 points or 0.12% at 5415.45.

Ashwani Gujral, Technical Analyst says, 5,470 was a key level while the markets were coming down. "Today, we have kind of tested that level again and confirmed that this market now has downside momentum. So, in case 5,400 gets taken out, which is about the 50-day moving average, then the next level here should be 5,250 to 5,270. Clearly, we are in a correction and it's likely that we underperform global markets in this period."

However, Ajay Bagga, Head of Private Wealth Management (PWM) India, Deutsche Bank doesn't expect a major correction. He sees Sensex at 22,000 by the end of the year. "We remain bullish on the Indian markets."

Here is the verbatim transcript of Ajay Bagga's interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Volatility has picked up over the last couple of days, do you think the market entering a corrective phase?

A: No. I would think we are looking more at a soft patch rather than a double dip recession in an economic sense. So, our perspective stays at a 22,000 target for the Sensex by the end of the year. More important for the Indian market is what will the foreign flows do. And that if you see the accommodative stance continues in the major investing countries like Japan, like US, like most of Europe. So, we do not expect a major correction. In fact there is a lot of money sitting on sidelines waiting to enter into the market at corrections and that also gives domestically a boast to the market.

The most important reason will be the continued accommodative stance of most central bankers around the world and that will lead to increased foreign inflows into India and that is a big support for the market.

Q: How are you translating that into a cash call as a fund though, have you increased your cash levels? Are you more or less invested in the market right now? What is your cash strategy?

A: We have increased cash over the last one month across customer portfolios, but that has been more customer driven. We are seeing risk aversion on the domestic clients, which sets in over two years back and it has not really gone back. So, most of the portfolios still remain very short duration, very liquidity enhanced and very cash oriented rather than being ready to take on risk and most portfolios are waiting for a correction. That again becomes a contrarian indicator.

Q: What are your key takeaways from the direct tax code (DTC) in terms of the market itself because now a couple of your products will also be open to dividend distribution tax?

A: Yes. I think the first thing we must notice is that thank god it has give us another 18 months because the markets have been spooked with bureaucrats moving around doing presentations on the first flavour of DTC,  then the second, third. I think we need some stability, we need time to digest. So, hopefully if by February we get an idea of okay over this next 12 months this is what is going to be implemented that will be extremely positive for investor sentiments.

The biggest complaint if you ask foreign investors, they will say is the regulatory regime moves too fast and it is not mostly in a linear direction. There are zigzags; there are opposite directions moves that come in. So, I take it as a positive that there is a pause, there is 18 months high-test that is being taken.

The capital gains move is positive for the markets quite clearly. Rest it is really irrelevant doing any discussion today; let us talk around January 2012 when we have some clarity. I think we have all wasted a lot of ink and a lot of time in dissecting a plan which never came through.