Find out: Why Brics Sec is bullish on small cement cos

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Banks, pharma, auto, FMCG rally to pause: Fortune Fin Expect USD 20-25 bn FII flow this year: Raamdeo Agrawal 10 cues you need to know before starting your trade Check out: Quantum AMC's top sector bets ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Sluggishness in the global markets has failed in causing any major damage to its Indian counterpart, which has been witnessing a northbound movement. But, a bearish Anand Tandon, Director of Equities at Brics Securities feels valuations are at the higher end with inflation still being a major reason for concern. "No frontline stocks are available at cheap valuation, thus we are not putting fresh money into the markets as of now," he says.

Looking at the rally in the cement sector, Tandon says he is positive on smaller companies in the segment and advises investors to buy bigger only for the long term. In an exclusive interview with CNBC-TV18 he cites explanations for the same.

On the global footing he says signals from the US markets are divergent. "You cannot have both a situation where bond yields continue to move down which means that the economy is in bad shape and the stock market continues to go up which essentially should mean that the economy is in good shape," Tandon reasons adding that the European Union is still not out of the woods.

Here is a verbatim transcript of the exclusive interview with Anand Tandon on CNBC-TV18. Also watch the accompanying video.

Q: What do you think is this a start of another big party?

A: I am not the partying types. So, the answer with me is somewhat predictable. I think investment is a lot more serious than going necessarily with the flow. At this time, should you go with the flow? I think you don't have a choice because for anybody looking at the fundamental situation, you have to argue that the valuations are at the higher end, interest rates are likely to go up further from where we are, definitely inflation continues to remain a worry and the global issues are coming back to the fore.

In all of this, it is not a scenario where one should necessarily be very bullish on the stock market. That said, till the market turns, you should not turn in anticipation of it will because the final flush is when you will get the big money. I am now waiting for that final flush. I am not necessarily waiting to put fresh money into the markets.

Q: It is likely there is a final flush coming. It is easier right now for you to justify a move on the upside rather than on the down.

A: Not really, but it can happen. The reason it can happen is because of the fact that the other markets are also not necessarily giving you any positive uptick. Clearly, if you look at the global markets and obviously we talk about the US for the most part, the signals that you are getting from the market are divergent. You cannot have both a situation where bond yields continue to move down, which means that the economy is in bad shape and the stock market continues to go up, which essentially should mean that the economy is in good shape. So, one of those two signals is wrong. It is your choice to pick up whichever one you like. But historically the bond market tends to get atleast the economic direction much better than the stock market does. So, one would argue that the US economy atleast is not in any shape to go up from here.

What does that mean for a market like India? Obviously, Europe is in much worse shape. I think the fears there are coming back again. There have been recent press releases saying that the Greek issues are coming back to the fore, they have been borrowing from the Central Bank of Europe and they maybe hitting a limit there as well. So, you could have a possible resurgence of risk perception from the European banks, especially the periphery. So, where does that leave a market like India? Only to the extent that you need to put money somewhere, we are an attractive market. Are we going to make any serious money? Right now, I think the cost of capital for most investors is close to zero. So, if you do more than zero, you are better off. So, in India you are likely to do better than zero.

Q: What you meant by the last flush is end 2007 kind of situation where you see another bubble forming in terms of valuations?

A: Bubbles have already been formed I think in various areas starting with the real estate market in most metro cities. So, the asset bubble is very much there. In the stock market, for example, I cannot see any frontline company in the index, which we could classify as cheap, many of them should be trading at half the value that you see them trading at. That is why we see the money moving into smaller and smaller companies with more and more business plans, which are of the just imagine variety. I mean that you are going to be projecting cash flows over the next twenty years and discount it all of today assuming that there are no issues in terms of implementation or that the companies are even going to be around it for the next twenty years to have them through.

In my mind, there is no question that it is nothing, but simply the euphoria because at the ground level, I think there are still serious problems with the economy, which the market is just ignoring. This is aided by the fact that we have a Central Bank, which refuses to move. In a recent debate, some of the bulls in the market mentioned that India does not have a stimulus. I don't know what it is meant by not having a stimulus when you got gross domestic product (GDP) which is supposed to go at 8.5% and you persist in maintaining a negative real interest rate scenario.