Current correction could be deeper, says Mehraboon Irani

However, he says, the market could surprise on the upside, if the stimulus measures actually come .  

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

Q: The Nifty saw the first signs of fatigue yesterday. Do you think it was just routine profit taking or would you be worried about a reversal in the uptrend?

A: Last week, we were very confident. This week, we continue to remain confident. I would put it this way. According to me, the political impasse, which we are seeing in parliament right now, has possibly dashed whatever hopes had surfaced when Chidambaram took over the finance ministry. We all spoke that reforms will ultimately happen. Honestly, that has dashed hopes.

Is that enough for the correction? I personally feel the correction was due. We need to accept the fact that whatever we are seeing in the Indian market is happening across the globe. Equity markets across the globe have gone up. The appetite for taking risks has increased quite a lot over the last one month mainly on hopes that we will have stimulus coming from the ECB and US Fed.

If there is disappointment, this correction could deepen further, not ruled out. As far as the US Fed is concerned, there could be some disappointment over the weekend. But of the ECB ends up doing this power of liquidity can take us much further up despite the fact that as far as fundamentals go we are lagging far behind.

I think India is just a whisker away from a major economic crisis. The macro headwinds continue whatever hopes over there have been dashed and we are running against time as far as downgrade goes. Despite fundamentals which are remaining weak and despite nothing happening, can we go up? The answer is yes. We could be surprised on the upside if the stimulus measures actually come either from the US Fed or from the ECB or from both.

Q: Is the run over on sugar stocks you think?

A: Honestly no, I remain as optimistic as what I was about a month ago. Despite the fact that monsoon has picked up a little bit, as far as the consensus goes, analysts estimates goes maybe about 5-6 months ago, production is not going to be that high. According to me, surplus which we were going to have is not going to be something which we are going to discuss about.

But, one should prefer the Uttar Pradesh (UP) based sugar companies. If you look at the balance sheet problems, Bajaj Hindusthan possibly should be out of the picture. Renuka is definitely out because it is not UP based company. The stock which in the frontline name holds out is likes of Balrampur Chini . There could be a correction of Rs 62-63 ana that could be an opportunity. We have a target for Rs 75 for it.