Pullback rally to drive Nifty up another 100 points: Emkay

He further added that the Greek situation will determine the course of the market. "If you see some major challenges globally, then there can be further deep cuts in our market. But if solutions are found and if the markets are globally stable, we would continue to be in a range trade," he predicted.

Below is an edited transcript of Karwa's interview on CNBC-TV18. Also watch the attached videos.

Q: How much more would you give this pullback?

A: I think maybe 1-2%. So maybe a 100 point further uptake on the Nifty is possible. As you rightly said, it is more of a pullback. There are no changes fundamentally, locally or globally. In fact, the environment is challenging, so we had a deep cut up to 4800 and we are seeing some sort of a pullback.

The depths of the market are not so strong. Even if there is an absence of selling and small buying, the impact is much higher than normal and either way. So I think what we are seeing is a decent pullback rally but I have my doubts whether it can sustain for a longer period of time.

Q: Do you think the pullback will be followed by more range trading or a sharper fall?

A: The next 15-20 days will depend how the Greek situation pans out in terms of whether they are part of the euro or not and what kind of solutions they find that will drive the global liquidity risk-on, risk-off trade. So if you see some major challenges globally, then there can be further deep cuts in our market.

But if solutions are found and if the markets are globally stable, we would continue to be in a range trade. Our domestic fundamentals are not so strong. So liquidity will drive our markets for some more time.

Q: What do you make of Thomas Cook paying Rs 50 to the promoter of the business and Rs 65 to the retail shareholders?

A: It’s very positive for the retail shareholders. I hope more such open offers are made whenever there are such changes where the minority shareholders are at least at par if not better than the promoter shareholders. So I think it’s a good signal and if other such offers take place, it would be good for the minority shareholders per se.

Having said that, Thomas Cook is a very strong franchise but if you look at the financials for the last so many years, they haven’t exactly been at the best performance. So to that extent, it's a good franchise and I hope that the new promoters are able to show strong performance.

Q: Is it headed for an eventual delisting given the way they have struck the open offer price? Also, it is interesting that the buy has come in from a financial party. It doesn't seem to be someone who is in the same business and can look to augment their own business via Thomas Cook. It's purely a financial transaction?

A: Possibly. There is only a 23-25% kind of float and this kind of aggressive pricing for the minority retail shareholders means that they are possibly looking at a delisting.

Q: How are things progressing in the broader breadth of the market? It's been terrible in terms of price damage. Compared even with what’s happened with the index stocks, do you foresee much more price pressure in the market?

A: The way to look at it is that what kind of timeframe that investors are having? Yes, there has been price damage across segments, but there have been good outperformance by some segments, stocks and sectors. This has basically been because of the strong balance sheets and strong cash flows that these corporates have been performing.

Challenges globally and locally will continue to be there. Every time we will have some issue or the other, but the basic fundamentals of investing don’t change. So investors who have followed the basic fundamentals and not got taken in by momentum, I think they are reasonably okay with the performance of their portfolios.

But wherever there is huge amount of debt or such challenges with the balance sheets of corporate, I think that’s where the maximum price damage has happened. Of late, investors have realized that momentum investing doesn’t take you far. Long-term mature investors are gravitating towards quality management and strong balance sheet stocks.

Q: What is your takeaway from the SBI numbers? Has it turned the mood around in the banking space?

A: Every PSU bank has had a different trajectory and there have been disappointments in SBI earlier. This time, the numbers have been positive. But having said that, going forward what kind of challenges corporate India is going to face and with the currency being what it is and how that is going to impact the asset quality will be a major challenge. So yes, as of now, things have been positive.

Maybe what we can also say is that the apprehensions in the minds of the investors were so high that given a decent set of numbers, we have seen a positive uptake in the counter. But to sustain that I think a few more quarters and overall how the economic scenario pans out will be the key driver for PSU bank valuations.

Q: What’s the big miss been in earnings season for you?

A: There was disappointment as far as one of the IT majors in terms of guidance they give versus the industry. So that was a kind of let down as far as we could see. Even some of the PSU banks, the guidances or rather the views now that they are more focused on asset quality versus growth, which is a very guarded kind of statements coming from various banks.

This possibly means that the challenges in the economy will be very strong. We will see a lot of challenges on the asset quality in the next few quarters. So that has been a dampener.

Q: The data seems to suggest that there is still money being pulled by some of the fixed income or gold kind of products in the mutual fund space and equities are still seeing outflows. Is that your experience as well from the retail HNI side?

A: I think you will have to differentiate between the retail traders and the retail investors. If you are talking about the traders who are trading the Futures and Options market, that’s a different ballgame altogether. But if you are looking at the investors who are basically the buy and hold type of investors, there are no new money inflows into the system.

The way we look at it in terms of new client acquisitions or new opening of demat account, that’s very slow and that’s a phenomenon which is across the industry. Retail investors are circumspect as far as equity is concerned. New investors are difficult to come by. The existing investors who understand the equity market and the challenges are there. But they are not putting fresh savings into the equity markets. They have possibly seen better returns on their real estate portfolios or precious metal portfolios and increasing allocations are more towards such products.

 Q: What about L&T, which came out with a fairly optimistic kind of guidance for next year? Did you believe that? Are you telling your investors to buy that name?

A: From a valuations perspective and inherently being an optimist by nature, I would believe that there is a requirement and such companies should be invested in. Having said that, what we have been recommending to our investors is to have a reasonably longer timeframe as far as investing in the cap goods or the infrastructure construction space is concerned. The uptake could take longer than normal and there could be disappointments in between. So if you have reasonably long-term timeframe then you can invest in such stories.