Elara Capital expects Sensex to hold 19000 in near-term

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Elara Capital expects Sensex to hold 19000 in near-term

Harendra Kumar, Head of Institutional Equities & Global Market, Elara Capital expects the Sensex to hold 19,000 to 18,500 level in the near-term.

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Harendra Kumar, Head of Institutional Equities & Global Market, Elara Capital expects the Sensex to hold 19,000 to 18,500 level in the near-term. "Our sense is that the domestic institutions are seeing some value closer to around 19,000 to 18,500 level. That should pretty much hold unless there is some serious other external issues. I think that should hold in the near-term."

He further says, "A big sell off taking us to probably 16,000 would be driven by larger external event rather than this internal situation that is evolving."

Below is a verbatim transcript of their interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar. Also watch the accompanying video.

Q: Do you get the feeling that the markets at least maybe in the short-term have made somewhat like an intermediate bottom around that 5,700 mark?

A: Yes, pretty much so. But what it has just defined is a trading range for the market for the next couple of months over the peak and trough where we can see some amount of selling pressure coming in and where we can see some amount of buying coming in.

Our sense is that the domestic institutions are seeing some value closer to around 19,000 to 18,500 level. That should pretty much hold unless there is some serious other external issues. I think that should hold in the near-term.

Q: Which means you do not see much of a sell off from current levels?

A: If you see the whole market is divided into two parts. If you see the sector leaders, they are pretty much resilient and we are not seeing too much of selling out there. The selling has been pretty much in infrastructure stocks, realty and some amount of capital goods stocks. These were the sector leaders as well in the last rally. They are not seeing any strength. So, we are seeing continuing weakness in these sectors and continuing strength in some of the larger sectors. So, it is pretty much two sided play. Even the markets have just corrected 2.5% last week, but some of the other stocks have fallen drastically. We would like to be aligned to the stronger sectors. That is why we see the overall markets could be in a trading range. A big sell off taking us to probably 16,000 would be driven by larger external event rather than this internal situation that is evolving.

Q: A couple of research heads have been telling us that they might be trimming their earnings growth numbers for the full year; crude at USD 85 is one point of discomfort, the tightening liquidity situation is another and the series of scams leading to possibly some slowdown in the investment cycle is also attributed as an another factor. Would you be looking to or looking to revise your earnings growth numbers, what are you going with anyways?

A: Two things are evolving. What we saw in second quarter as well is a significant increase in cost push and given that we are a very commodity heavy business we are going to see some amount of pressure as far as steel, autos are concerned. If there is going to be some amount of slowdown in consumption then our profitability is going to be hurt.

The larger risk that we see, if risk emerges, the story of PE expansion also gets curtailed and we get cap closer to 18 or 19 times in terms of the PE multiple. We run a risk in markets currently. That is our overall top down view on the market also emphasis that probably we are in a trading range unless some large trigger comes up. In the absence of earnings and PE multiple moving up we have to be more tactical than strategically very long on the broader market at this point of time.