Nifty upside capped at 5400, be defensive: Dipan Mehta

In an interview to CNBC-TV18, Dipan Mehta, member, BSE and NSE says, it is more likely that the market continues to trade in a particular range. "Although we may have some positive news flow from Europe, it is highly unlikely that the Nifty can sustain and trade significantly above 5,400 levels for an extended period of time," he adds.

On the other hand, Sudarshan Sukhani, s2analytics.com says, the trading range is likely to end very soon. "Tomorrow, I think the market will take a decision whether it wants to go up or down. I suppose everyone is now waiting for the ECB meeting today," he asserts.

Within the largecap, Mehta bets on private sector banks, large IT companies and some pharmaceutical stocks. "Defensive strategy should be implemented now," he adds.

Also read: Darashaw sees Nifty in 5000-5300 range, suggests picks

Below is the edited transcript of Dipan Mehta’s interview on CNBC-TV18.

Q: Where is the market going or do you think, after all this talk about great global news flow, we will still be trapped in a range?

A: I think it is more likely that the market continues to trade in a particular range. Although we may have some positive news flow from Europe, it is highly unlikely that the Nifty can sustain and trade significantly above 5,400 levels for an extended period of time. The reason for that is that basically, at this point of time, we are seeing the technical’s are supporting the market. Ofcourse you have got decent liquidity inflows coming in from the foreign investors.

But, on the fundamental side, the picture is getting murkier. It is deteriorating by the week rather than improving. The government is just not taking any measures to put its fiscal house in order. Oil prices again have begun to rally. Even the RBI policy was quite clear that unless they see clear cut action on part of the government and fiscal deficit coming under control, they are not in a hurry to reduce interest rates. You have some positive factors coming in the form of liquidity inflows and some of the other global markets doing well. That keeps our sentiment on the positive side.

But as a fundamental analyst you feel a bit disturbed that the trend continues to deteriorate. That is going to put a bit of a roof on top of the market. But just let us wait and see how events actually play out.

Q: From earnings season, which has been the biggest disappointment for you?

A: We were expecting auto companies to disappoint. That has happened. I think some of the metal companies also, whatever results are available, also have tended to disappoint. But I would have to admit that the disappointments are far less than what we expected, when we started out with the earnings season. We are seeing positive surprises coming through from a lot of the pharmaceutical companies, some of the software. Midcap software companies have also delivered good set of numbers.

Overall, I think the companies, which are consumer oriented, have continued to deliver. So, for investors, who have been buying into quality, companies which do not require too much of capital and more or less debt free, if you see over the last two-three months, the portfolios have done pretty well. By and large, they have been able to beat the broader market indices that are stuck because of laggards like SBI and to an extent Reliance and maybe some of the other PSU companies.