Excerpts from CNBC-TV18's exclusive interview with Sangeeta Purushottam:

Q: Do you think that the worst is over and the bottom is in place? Can you say that with conviction yet?

A: I do not think we can say that with conviction, because the news flow will remain mixed for some time. So, we are likely to see a market, which will be range bound. But it is a little early to say whether the worst is behind us.

Q: What did you make of the smart global rally, that you have seen over the last 7-8 days? Most global markets are up 7-8% and there is talk that there will be a Fed cut on September 18? How do you see the next couple of weeks?

A: The next couple of weeks will play out into what is expected out of the Fed. We saw a huge fall in global markets. As the markets adjusted to what was happening on the sub prime front, we saw them fall.

There has been some element of positive news flow, whether it is a cut in the discount rate or some of the hedge funds reopening, which had closed earlier. That is partly leading to a rally.

But it is still early days and still a little fragile. So, we will see it moving like this towards the Fed meeting and that is really what is going to decide the direction forward.

Q: What do you think might lie ahead for us? Will we snap back, as hard as the rest of the Asian universe has or is this market going to get a bit quiet in the near-term?

A: The market is going to be rangebound, because we have both the global as well as the domestic factors to deal with, in terms of political uncertainty. No one, at this stage, can really put their hand on their head and say which way things are really going to move. Therefore, there will be a mix of hope and disappointments, which is going to come forth in the next few weeks. That is what is going to take the market up and then take it down.

In terms of valuations, we are about 15-15.5 times now, which is at the lower end of the trading range. In order for it to move up to the higher end, you need strong domestic or foreign flows to come in and drive the market higher, in terms of valuations. That does not seem very likely. So, we are likely to go through a phase of consolidation where for longer term investors, there will be opportunities to buy and hold. The market does go through these kinds of phases once in a while and that is what we are going to see happen.

Q: What kind of range do you expect the market to hold? At 14,600, where are we on that range you set out for it?

A: A range of roughly 13,900-14,000 thereabouts to 15,000 is what one sees. So, I would say we are in the mid or slightly higher-end of that range right now. 

Q: What would you buy more aggressively, PSU banks or private sector banks?

A: There is still a lot of value in the PSU banks. The consolidation story there, will play out as we go along. So, that does makes sense and many of them have fallen a lot also. Selectively, we would buy in some of the private sector banks, as and when valuations look reasonable. 

Q: The one space, which has done almost nothing over the last couple of months is media. They had a great run, but the process of consolidation has been on for many weeks now. Do you think they are ready to move again or do they need to catch up with valuations for a while longer?

A: I think they need to catch up with valuations a little while longer. We had said that we like this space for the growth that it offers, but valuations were beginning to look fairly rich. That is what we are seeing playing out.

The stocks did run up a little ahead of the fundamentals and are basically going to languish for a while before the move starts again. Fundamentals are great, in terms of the earnings growth story, but valuations are still a little rich. 

Q: Cement and fertilizers are two spaces, that have really begun a stroke of outperformance for themselves. Would you buy anything in either of the two?

A: Of the two, the stronger space may be the cement space, depending on how the demand supply outlook pans out. There is a view in the market, that the oversupply situation, which is expected in '09, may not be as bad as it was earlier thought to be. This is because some of the projects are getting delayed, because of either constraints in the equipment side or civil side.

Therefore, the supply scenario may not be so bad and pricing power could be stronger than what people thought. To me that looks more like a story which can sustain, if these factors turned out to be true.

Q: Post everything that has happened through last week, both by way of global cues and political cues, a lot of analysts are making the point that this market may again brace to make new highs for itself in the next few months. Would you go with that?

A: The market will make new highs as we go along, based on the fundamentals. The long-term story remains very much in place. But within that, we will see corrections. We can't often predict what factors lead to it. So, the market consolidates for a while and then moves on.

We need to see the current uncertainty play itself out. It is only after that, that the market will make new highs. Yes, it certainly does seem likely that it will do so in the next few months, once we are out of this phase.   

Q: Do you think the volatility is about to die down? Are we nearing an end to that extreme volatility phase?

A: I think so. The volatility is likely to moderate considerably.

Q: Do you think the political situation has sobered down a bit or is the risk still there?

A: Yes, it has sobered down. The sharp impact, that one sees, when news first breaks out is gone, because you have digested it and look at the implications. We had almost forgotten about politics over the last 3-4 years and it has brought that factor back into center stage. The secondary impact of that is going to be with us for a few months.

Again, that news flow will have the impact of shaking the market once in a while, till we have clarity, about when the next polls will be held and what is going to happen. So, once more people will start looking at politics a lot more seriously than they have done in the past.

Disclaimer

It is safe to assume that me and my clients may have an investment interest in the stocks/sectors discussed.