Alchemy Cap sees Nifty at 5700-5800 only if govt acts now

Hiren Ved Alchemy Capital is hopeful that the Nifty will gather strength to touch 5700-5800 in the near-term only on the back of policy moves.

In an interview to CNBC-TV18 he said, "Certainly there is potential that we can move to the highs that we have seen before. Maybe 5,700-5,800 is possible in the near-term if some of the stuff that market has been expecting do pan out. There have been bouts of skepticism all throughout 2012 and people were positioned very conservatively."

Also read: Current rally may continue; buy on dips: Credit Suisse

He stresses that the market is willing to pay premium for quality stocks at this point. Ved, meanwhile, advises to seek opportunity in stocks benefitting from weak rupee as earnings growth in the local currency is still to be played out.

Here is the edited transcript of the interview on CNBC-TV18.

Q: From here on what are the key triggers is it still global liquidity or do you think markets may climb on anything that comes from New Delhi over the next few days?

A: Markets have been largely moving on what has been happening globally and then there is overlay of what has been happening domestically. I think the more important trigger according to me is what is happening globally.

The correlations to those events are pretty high, but we have now come to a stage in the Indian markets where there is some expectations that finally we should see some kind of policy movement from Delhi as well. If that happens that would really help in the overall positive global context that we are seeing in the markets today.

Q: What kind of a potential does this market have to scale up if both these events play out well, do you think we could get back to those highs of the year or is there more in store for us towards the end of the year?

A: I think certainly there is potential that we can move to the highs that we have seen before. Maybe 5,700-5,800 could possibly be where the Nifty could go in the near-term if some of the stuff that markets have been expecting do pan out. I think there is potential for the market to go up because there have been bouts of skepticism all throughout 2012 and people were positioned very conservatively.

Therefore, there is a potential that there could be a rally if the Fed delivers a QE today. Subsequent to that we do see some of the reform measures that we are expecting, especially the hike on diesel price etc.

Q: Is it an uncomfortable rally because so much around us is telling that market should not be going up, yet it is going up every day because of global factors - is it a case of people believing in the rally because they know money is there or do you feel there is conviction that markets are going up for justified reasons?

A: What is happening is that quality has worked all throughout this rally. Even if this is a liquidity driven rally, the fact of the matter is that liquidity is now chasing quality and that is becoming a larger and larger proportion of the index.

As the weight of quality goes on increasing in the index and since money chases quality, you will continue to see things move higher. Is there a very high conviction in the rally? I don’t think there is a general conviction in a broad market rally but, there is definite conviction in individual stocks and sectors which have held out pretty well throughout the last 6-9 months or 12 months for that matter.

I think people are now betting more on what is working on the market rather than a very broad rally where everything moves up. This is not the 2003-2007 kind of rally. This is a typical rally that we see in a sideways market and the strong just gets stronger and the weak gets weaker. I think we are going to see more of that going forward as well.