Govt must hike fuel-prices; de-allocation not easy:Auroch

Below is the edited transcript of the analysis on CNBC-TV18.

Q: What is the prognosis of what the rest of the month may have in store for the markets?

A: I think most of what we have been seeing is extremely liquidity-fueled. My personal take on the Fed date today is that it is not very positive. There might be some extension of this easy liquidity till 2015.

We are not expecting an unlimited kind of QE that the market is pricing in. If you interpret that in the context of the fundamentals, it does not paint a pretty picture since both the CBOE VIX as well as India VIX are at a multi-month low.

So there is complacency in the market and most market participants are expecting the liquidity party to continue. And whenever that party ends, there will be a bout of profit-taking.

Our view is that the market is in a state where it cannot be pushed around. It has retreated to defensive positions with the auto sector losing luster, IT staging a bounce-back, pharma continuing to do well and a caveat-filled FMCG sector going strong.

So the market is in no position to allow investors to step out too much and take a highly contrarian view. But in the next couple of months, the RBI along with some of the larger central banks, will be forced to move with a substantial amount of liquidity and that is when we can expect to see the next cycle begin.

Q: What is the likelihood of an upward revision of fuel prices?

A: The revision of fuel prices might be initiated through the GDP data for the last quarter; it is already at 8.1%. If that continues even a GDP above 6-6.5% is most certainly going to ensure a downgrade and that is something that neither the government nor the central bank is looking forward to.