Correction could set in at these levels: IL&FS Investsmart

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R Sreesankar of IL&FS Investsmart believes that the markets are probably at the top of the range and one could see a correction coming out from here.

He says that People are worried about growth. "If that growth is going to slowdown then the kind of liquidity that we are seeing across the globe flowing into India, be it in terms of real estate funds or in terms of any kind of private equity money, will take much time to get reduced," he says.

But Sreesankar is positive about the FMCG sector.

Excerpts from CNBC-TV18's exclusive interview with R Sreesankar:

Q: Do you think that the markets will surprise on 11,000 plus levels?

A: I don't think that the market will surprise us on the positive side moving up. I tend to believe that the market is probably trading at the top of the range right now. I have said this probably even ten-fourteen days back but the markets have moved up beyond it. I believe that the markets are probably at the top of the range and one could see a correction coming out from here.

Q: You don't see any major rally, which is building up now because the volumes and retail participation have come into the market after a long time?

A: Those things do happen time and again. We see this kind of developments taking place. But if we are going to see a global slowdown and the kind of numbers that we have seen from the US, if it is any indication, I think we are going to have the real problem as far as the growth is concerned.

People are worried about growth. If that growth is going to slowdown then the kind of liquidity that we are seeing across the globe flowing into India, be it in terms of real estate funds or in terms of any kind of private equity money, will take much time to get reduced. That is what the historical evidence of liquidity has showed us. So should that tend to happen, a lot of these stocks probably may not be getting the same kind of rating that probably a lot of investors are giving.

The Indian GDP growth is good. We have the companies growing at anything between 15-30% in terms of earnings growth. But the fact remains that when things start to slowdown all around you, you would probably see the earning still being there, but price would not be there. There will be the PE contraction, which could take place. I am not overly optimistic on that side.

Q: A lot of people have been telling us that while they do not see the Index running away, they can actually see a lot of outperformance happening in the midcaps. Would you agree with that hypothesis?

A: I would think that some of the midcaps could probably rally. Again I am saying this from only one angle. When the Sensex had moved down from its peak, it was down 15%. What I saw about the BSE midcap Index or the smallcap Index was that it was down 37%. So the smallcap stocks have actually moved much faster than the largecaps.

When the largecaps recoveries are happening and when the retail investors get in, you are bound to see some kind of a rally happening in the midcaps. But I am not sure whether you are going to see a lot of institutional investors coming back in with these midcaps, unless there is a very compelling story.

Sugar, for example, was the worst performed sector in the last four months. It was down anything between 50-75%. So, there had to have a bounce back happening in sugar, which we are seeing right now.

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