See no significant upside from 5700 in Oct: Nilesh Shah

Market may not see significant upside from the current 5,700 levels in October, Nilesh Shah, managing director and chief executive officer, Envision Capital told CNBC-TV18.

"In October, the focus would be on the earnings season. If any upside were to happen, it would be more because of positive surprise that we could see across sectors or companies. Baring that, it is unlikely that October is going to be no great month," he added.

However, given the strong liquidity inflow and policy measures announced by the government, the market may not see a significant downside. “The downside in the market is unlikely to be more than 10 percent from the current levels.”

The current market valuations are attractive and any further downside can be utilized as an investment opportunity from a 2-3 year horizon, Shah suggested.  Meanwhile, corporate earnings growth is expected to pick up from FY14 onwards.

Below is the edited transcript of Shah’s interview with CNBC-TV18.

Q: We have had a dramatic turn of events in the last few weeks but from this level of 5,700 can you see more upsides in October?

A: It looks very unlikely that we would have any significant upsides in October given that we have had pretty strong moves between August and September. This has been propelled by lot of the global liquidity infusion that we have seen and several local factors including the reforms the government undertook in various fronts, which drove the markets up.

In October, the focus would be on the earnings season. If any upside were to happen, it would be more because of positive surprise that we could see across sectors or companies. Baring that, it is unlikely that October is going to be no great month.

Q: For the rest of the earning season, what is the expectation, are you expecting the downgrade cycle to bottom out going ahead?

A: It looks very likely that we are seeing the worst or we are pretty close to what is the end of the downgrade cycle. A clear indicator of the fact is that even the IMF is not talking of sub-5 percent GDP growth, which is extremely conservative.

If one were to extrapolate those same numbers, the potential for a further downgrade from the current levels is very unlikely given that we have seen some kind of softening in commodity prices. Also, if interest rates now begin to fall, sometime early next year then I think clearly the case for further downgrade in earnings would be very remote or weak.

Q: Where is the floor for this market, are you expecting a draw down in October through this earnings season and if yes what levels could a correction drag the Nifty down you think?

A: At this case the momentum is pretty strong, the liquidity is very strong. The tailwinds particularly from the government in terms of a lot of the measures which are getting announced every second day are unlikely to kind of stem a downside.

At this stage, the case for a significant downside on the market does not exist. Over the next few months, and quarters, downside is unlikely because of local reason; if at all it could be more because of global reasons. There is a very strong possibility of that that at sometime in early 2013, mid 2013 the impact of the QE3 and the LTRO kind of subsides that is really the time when you could probably see a downside because of global factors.