Don't see a breakout in mkts this July: Centrum

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Don't see a breakout in mkts this July: Centrum

In an interview with CNBC-TV18, Melrick Dsouza of Centrum Stock Broking, spoke about his reading of the market and his outlook.

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Yesterday was the close of the June series. The benchmark indices - Sensex and Nifty - were up 6.4% each while the CNX Midcap index was up 7.4%. So, how will the July series pan out?

Melrick D'souza of Centrum Stock Broking does not expect the markets to break out next month. "Lead Indicators in the US and Europe don't suggest a positive turn for markets. I think the markets are likely to head lower."

Investors, he stated, may book out of midcaps and some largecaps.

He expects earnings to be the next key trigger for markets. The street is also watching how the monsoon pans out and the Reserve Bank meet which is scheduled for later next month where a 25 bps rate hike is expected.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Does it look like this series round we have a chance at a breakout because we had some trip ups lately?

A: I don't think so because you have got a week of triple witching-you have just finished futures expiry, which has been pretty good. Then you have got the domestic funds who would like to do the NAV propping exercise, going into next week and you have got the EGoM meet on oil. Though these factors will be positive, I think that essentially until the earnings season you are going to see people use this opportunity to book out of midcaps and some largecaps and this might not be the time to play for a breakout

Q: What is the more likely outcome that the market continues to bubble around this 5,300-mark or do you expect to see a retracement?

A: You might use the opportunity to retrace a bit because a lot of money is going to go to into QIPs and IPOs. So essentially the secondary market won't really have flows to sustain things as some of the domestic and larger local participants kind of book out of more concentrated positions. The only trigger that we cud see probably is from earnings, because even if we look at US and Europe, lead indicators don't suggest that there is any reason for markets to turn positive.

On the other side you have got metal prices that are firming up, some kind of flight to gold and some kind of flight to the US dollar. If you look at where risk is stacked up, I think the market will trend down. It will remain a trading market but it will retrace more than just remaining in a very small zone.