Mkt in bull phase, Nifty can retest 6300 in a yr: IL&FS

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After a mammoth rally in January, Indian market currently appears overbought but indicators suggest that it has entered the bull phase. According to Vibhav Kapoor of IL&FS, the Nifty has a strong support at 5100 and could retest all-time high in the next 8-12 months. "There are quite a few factors which suggest that probably the market has turned around. Going forward, there is a potential for the Nifty to reach the previous top of 6,300 in about 8-12 months." He, however, cautioned that a lot is going to depend upon the behaviour of oil prices and situations in Europe and the US. He advised one should remain invested in this market, that too in cyclicals ans not defensives.

Although many corporates have not performed well this earnings season and the numbers were largely mixed, Kapoor said it will not have much bearing on market. "Global factors will determine market movements going forward."

Also read : Current rally should sustain for some more time, says IIFL  

Below is the verbatim transcript of Vibhav Kapoor's interview on CNBC-TV18. Also watch the accompanying video.

Q: It's been a terrific run and we have paused in the last couple of days or last one week, do you think we will just get off with consolidation or are you calling for a correction here?

A: The market has run up great deal, more than 20% in the last 6-7 weeks, so a correction could always be expected. But when there is so much momentum and liquidity, you are not sure from where the correction is going to come. So while the chances are strong for some correction to happen, you cannot be sure about it.

Q: What is your sense, would you still buy stocks out here at 5,400 Nifty or do you think most of the rally has already played out?

A: I think overall the market has gone into a bull phase after it crossed the 5,200 mark. The strength of the rally, the breadth and the fact that so much liquidity is coming in point towards this factor. The market seems to be of course looking forward to a lot of things and seems to be of the view that things have bottomed. For example, in terms of earnings downgrades, interest rates have topped out and there is a little more stability in the global markets and the global economy. So going forward, the way the bull run progresses or the market progresses, is going to depend on all these factors. Oil is going to be another very important factor. But till any of these factors turn negative, one has to assume that the market is headed upwards in the medium-term.

Q: For the near-term though, would you lean towards a consolidation around these levels because of the sharp price appreciation?

A: Definitely the market looks a bit overbought right now because we have had such a tremendous rally in the last 7 weeks; about 20%. So it is a bit overbought and a lot is still dependent on what happens going forward in March - in terms of elections, Budget and Credit Policy. I think probably the market should cool off a bit from here, a couple of percentage points. But it's difficult to say sometimes in momentum situations and if the liquidity continues to flow you could either have a sideways type of movement for a couple of weeks or you could have the market correcting by 2-4 percentage points.

Q: Are you worried though about the earnings performance we have seen particularly over the course of the last 7 days and whether the market is over optimistic on that regard?

A: At this point, it would seem so because the results have been quite mixed and as you rightly said in the last few days quite a few corporate have not performed too well. But the market is looking forward, rather than at the current results or at the current performance of companies. And it's saying that things have bottomed out and from here they are not going to get worse. Therefore in such situations, you don't get too much of downfalls even when the numbers are not so good. We have seen that in so many companies, starting from Maruti where the results were pretty bad and yet the stock went up Rs 200, we saw it in Tata Steel. So we have seen that in quite a few companies. So I think the market will continue to look forward and not worry too much about current performance. But that could definitely cause or be a cause for this 100-200 point correction on Nifty.