Nifty may test 5200 in Jan 2010: PN Vijay

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In an interview with CNBC-TV18, Portfolio Manager, PN Vijay spoke about his reading of the market and his outlook.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Are you still holding the range-bound theory for the rest of this month or do you think things may turn either direction?

A: The month is so far down to expect anything dramatic would be unlikely because we still have very few trading days and Monday is also a market holiday. So we will be range-bound. But the matter is clear that the market has found a base. It has got spooked due to inflation fears. Last two weeks, inflation fears literally sank the banks stocks. Some amount of composure and comfort has returned to the market. So I think we wouldn't go down much but I do not think there is any upside in the next few days of trading.

Q: It is very event heavy going into the first part of 2010 though. First there will be earnings, then there will be an Reserve Bank of India (RBI) meet and shortly after that the budget. Is there a chance the range for the market can get readjusted in the early part of 2010?

A: I feel we will have a good rally in January 2010 because we've had some good news coming in the shape of a strong GDP growth which came in at 7.9%. Then we had very good industrial growth and credit offtake has picked up. All these things the market has totally ignored.

If you see the last two months from about October 10 to now the markets is in a very narrow range. Markets never forget but they always come back and revisit realities and in the US also, we have been getting some good economic news. So if the earnings are not too bad we should try and reclaim those 5,200 levels sometime in January.

Q: What about the banks? Yesterday was a good day for some of them really anchored the market so to speak. Do you think the rate hike fears have put behind us at least for the shorter-term?

A: Yes, those fears were almost phobias. We had people anxious that the RBI Governor was meeting the Finance Minister. I am told that the mandatory meeting both of those gentlemen have every month or even more often than that. The market got panicked about it but I think we will not get a rate hike in India. We will get a CRR hike probably about 50 basis points going into the third week of January when the normal credit policy if announced then it will immobilize about Rs 25,000-27,000 crore of bank funds, which is not that much compared to the liquidity flushing around with banks right now.

The markets had to react but I think it overreacted a bit and now the markets' realizing that because last two days we have seen a over performance of bank stocks. Inflation is there but curtailing liquidity is not the solution for inflation that is very clear. The banks have got spooked but right now they look quite attractive to me.

Q: If the call is that if the market can actually scale up by the time we step into next year, would you be buying right now or do you think that pricing point will come to you rather than buying at 4,900?

A: It's a good question, it's become sectoral. What most of us as a fund managers are doing is we are actively looking at new realities, new winners. I will give you case in point - all of us started getting overweight in IT stocks, all of us started getting overweight in pharmaceutical stocks about a month back so its natural process; its not as if we are all sitting on 80% cash and suddenly we see some 4,940 and put all our money.

We are mixing wherever we see people getting historical like metal for e.g. yesterday, we are outing. So there is a lot of churning going on as we can see in the high lows for example we had a tremendous figure of about 133 highs to 4 lows yesterday, which is a strong confirmation of an uptrend. We are doing that all the time but incrementally we are buying more and more into pharma stocks, IT stock, construction stocks and so forth.