Q1: Take us through the kind of technical trends that may emerge in 2007, because we have been seeing fundamental fund flows come by on the markets but technically there have been bouts of run up and a run down?

A: I think 2007 is likely to see the best of the four-year uptrend that began in early 2003. The markets may complete the four year cycle that began sometime early 2003 and in the first half of this year, the four year cycle may be over; and during the process we continue to believe that levels of 15,500 plus should be tested. The fact that we have consolidated so well in December only means that it has opened the possibility of the market rallying beyond February 2007, which we earlier thought was possible topping month. So I think the set-up on the charts continue to be very positive.

We are still making higher tops and bottoms; I really don’t see any concern on the long term set-up but it is in the second half of this year where we expect sizeable correction to come in. So the first half looks okay, while the second one might just begin a medium term downtrend for our market.

Q2: So you are saying that in this market, the bull run on the charts will top out in the middle of 2007. You called 2007 the best of the four-year up trend cycle; so you obviously mean the first six months. What kind of returns can we expect in the first six months?

A: During a blow-off just about every stock in every sector does well. So it is very difficult to predict as to how high will the markets move. I think that we saw last year in the first week of May when we were actually topped out; before that we saw about a quick 1000 point move coming in and at a 14,000-Index, which is very close now, there is always a possibility of a 2000-point rally from current levels. So, blow-offs are typically very rational and difficult to predict, which is the reason why one should make the most of it in the next few months.

I think since the rally began in May 2003, it has been a month wherein you have seen significant activity; either we have seen the market topping out or bottoming out. Good example is May 2003 when the rally began, as May 2004 is when you had a bottom being formed and May 2005 led the beginning of the next leg of the uptrend and in last year’s May, we again actually topped out. So that is the reason why I think May is going to be a very important month this year too.

Q3: Would you be looking at any levels, either the upside or the downside, which could turn things around?

A: I think from a short term point of view, we are maintaining our target of 14,200 on the Sensex and 4,100 on the Nifty and there is a good chance that these levels will be tested in January itself. On the downside, I think it is very restricted; 13,500, is a very important support level and 3,900, which a lot of technicians are watching at, is also an important support. So 200-300 point on the Sensex is the kind of downside you have here and upside potential is 1000-1200 points, which makes it a very good risk-reward ratio for buyers even at current levels.

Q4: Would you be looking at largecaps, smallcaps, mediumcaps on the chart-specific stocks?

A: I would definitely go with mid-caps and large caps. I think in the last leg of any uptrend it is typically the mid-caps and small caps, which outperform by a wide margin. In fact in the US there is something called the January effect, wherein you have mid-caps and small caps outperforming the large ones by a wide margin.

 I think January is going to be a month wherein you can see the mid-cap sector gain as much as 10-12%. So we are talking really big mid-caps and small caps and I think almost on a weekly basis you will see more and more stocks participating in the rally.

Q5: Give us some picks on this one?

A: Well I think technology is a sector, which we like at current levels. We have seen in the recent past that every time there is some negative news, the market discounts it very fast and when there is some positive news, the market latches on to it, because of which, you see newer highs being created. So we are in the results season; may be the technology sector might just help the market scale new highs in the near term. So that’s the sector which we like. I think banking still looks good for a 15-20% rally in the next four or six weeks. Metals, I think is a sector which should make a come back in the near term. So technology, metals and banking are the three sectors that we like at current levels.

Q6: Any stock-specific ideas on all the three sectors mentioned?

A: Sorry, I would not be able to comment on stocks. But I think the frontline and the mid-cap picks in the three sectors, which we mentioned..

Q7:  You also like the PSU space. Do you expect ONGC to really be the key driver from that sector for 2007?

A: Yes, oil and gas is the sector, which we really like. They are two big Index heavyweights and we expect both to do extremely well in the next three or four months - may be gain as much as 15-20%. So I think oil and gas being an index heavyweight is also a sector, which we like at current levels. 

Q8: And healthcare?

A: Healthcare, well bits and pieces. You have certain stocks in the sector doing well, but I don’t think there is big money to be made. If you have to play the markets from here, you have to be in sectors where just about every stock moves. So healthcare I think is more of a defensive play; you have to be very selective there.

Q9: Capital goods - what is the call you will make on this one? Which clearly was a leader in 2006? Do you think the steam would continue for 2007 with the frontliners or will we see a bit of a cool-off?

A: As I mentioned we are in the last leg of the long-term uptrend, that will be completed in a four-year cycle; So, just about every stock and sector will do well in the next few months. So you just have to pick the right stocks at the right time and anyway in the last leg you pick anything, you don’t need analysis fundamental or technical, the momentum will just take it higher.