Nifty may rally to 6000-6200 in few months: Prime Sec

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The market rally in India has been robust over the past few days but now it seems it is settling into a range. N Jayakumar President of Prime Securities sees the Nifty trading in the 5,250-5,750 range till October 2010 and feels that it should hold 5,350 in the current liquidity scenario. "Owing to abundant liquidity in the system, a 5-7% rise in a three-four week period would signal impending correction. This will also be on account of low retail participation and under-investment of investors in India."

In an exclusive interview with CNBC-TV18's Udayan Mukherjee Jayakumar says that he doesn't see a big fall in the market. In fact, it may rally to 6,000, even 6,200 in the next few months, he says.

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

Q: Do you think 5,350 is it for September-October, we won't go much lower than that or lower than that at all?

A: I think 5,250-5,750 is the sort of broad range. I think on a more specific basis, maybe 5,350 will hold. Right now, even 5,250-5,300 kind of range seems kind of difficult. With this kind of low volatility and high liquidity scenario, I think 5,350 should hold reasonably comfortably.

Q: There was a lot of expectation in many quarters that September-October phase might see that correction, which will enable a lot of money to come in, closer to 5,500 kind of levels, do you think that opportunity may not be presented?

A: The moment you word a question saying that correction in order to enable money to come in, markets are never so accommodating. I think the real issue is that world over whether it is in Japan now or it is in the US or in different parts of the world, liquidity, which is being eased, is probably not ending up going to the place where it is supposed to. But it is certainly ending up going to other markets. So, liquidity in a sense will find its way through every crack in the wall as it were to come to areas of higher return. I think that is what is happening. So, there is more money waiting. That money continues to come through whenever there is a large issue, whenever there is a big offering of any kind where on a non-price impact basis, people can put in money, they are very happy doing so.

So, I think because there is money waiting and because the liquidity is so abundantly clear across the world and the volatility being this slow, which means that the market is grinding away, I think the first sign of correction will be when the market jumps let us say 5-7% over a three-four week period. For one good reason or the other, I know there is no empirical evidence to say so. But this is a sort of thumb rule we are using here, at our place, which is to say that if there is 5-7% move over the three-four week period, followed by some level of participation and that being defined as large differences on the future, large carry costs compared to the cash market, those would be some indicators, which indicate that the market maybe ready for a correction.

If you saw even a small correction comes through, when any of these indicators kicks in, which means if it is a 150-200 points Nifty rise, which maybe just 3-4%, but the cost of carry goes up then immediately some small hiccup in the market, somewhere in the world leads to a correction and then the market stabilises. So, this is a very typical kind of scenario coming through. It is a pretty strange market at one level where index leaders are hitting new lows while markets are hitting new highs. Atleast for the better part of the last two and a half decades where I have been in this market, I haven't seen something like this. It gives me no joy to see that markets find new ways to make new tops and this is one such way to do so.

Q: GTL Infra -Rel Infratel deal, you track these things quite closely, this deal also I remember you were commenting on earlier, any reason that you know while it is coming unstuck?

A: Nothing at all. It is just that from the time the announcement was made upto now, we haven't have as I said any kind of progress report, if you will, as to how the deal was going.

One thing that was or has been seen to be quite peculiar to me if GTL Infra was acquiring this level of debt, right from day one in a very strange sense the market tended to the move up, as far as GTL infra was concerned. I found that extremely interesting because if from day one the market has been moving up or atleast has been remaining stable rather than reflecting the amount of debt that the company was taking on, it seemed to be almost as if the market was pricing in that the deal would not happen, almost from day one.

So, that is the only comment I can make. I have no idea to figure out as to why this deal has been called off or otherwise. I think the high amount of debt transfer may have had something to do with it, maybe banks didn't agree maybe something to do with the lenders is all I can say.

Q: You think it is funding issues, it has not been called off from the other end, as in from the Reliance end?

A: I wouldn't know. My own sense is that the amount of debt transfer that was happening may have been a matter of concern to GTL lenders. That is the only thing I could comment on. As I said the fact that the stock never fell was kind of surprising and it kind of amused me that normal corporate finance logic would expect that the stock should fall with they taking on this level of debt. But for one reason or the other, I am hearing it for the first time, just like this channel is.