Sensex may hit 22k by Diwali: Veda Investments

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Sensex may hit 22k by Diwali: Veda Investments

Fatigue seems to be crept in the market as it has taken a breather after a strong rally starting this week.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Fatigue seems to have crept in the market as it has taken a breather after a strong rally starting this week.

In an interview to CNBC-TV18, Vikas Pershad of Veda Investments said the market is unlikely to see 25-30% rise over three-four months time. Saying that cheap capital helped to move the market, he added that India is fairly priced at current levels.

However, Pershad feels that the Sensex may hit 21000-22000 by Diwali as capital market structure is improving.

Pershad is betting on IDFC , ICICI Bank and some small banks in the counter. He is also positive on Dalmia Cement . According to him, it is difficult to bet on the telecom sector.

Here is the verbatim transcript of Vikas Pershad's interview with Udayan Mukherjee on CNBC-TV18. Also watch the accompanying video.

Q: It has been a sharp rally this September. Are you surprised to see the Sensex at 20,000 and Nifty at 6,000 so soon?

A: No, I am not surprised at all. As we have been speaking over the past few months, I felt that one of the most massively mispriced markets in the world was India on the long side. So I am not surprised that we are where we are. But for the first time since we have been speaking, India is fairly priced for now. When we were speaking at the end of May and the Nifty was at 4,800, I said I was an aggressive buyer then we have gone up 25% since then. I think somebody buying today should not expect a 25-30% rise over the next three-and-half to four months. That would be out of line with fundamentals and valuations would be stretched.

So, if you have been a part of this ride, if you have access to options, you put callers on your positions or you sell some covered calls or maybe trim some profits. There will be some amount of a pullback and you will get another chance. The India story is not done. We are certainly not in bubble territory, some sectors are little frothy. But I am not surprised.

Q: What are these sectors that you are talking about? Do you sense there is any risk of a bubble formation in any of them that you are speaking of?

A: I wouldn't say bubble. Even though I have been very excited about the banks and I still like the banks whether it is an IDFC or an ICICI Bank or some of the smaller banks. There seems to be a little frothiness there. The banking story in India is not new for it to go up everyday. People are getting ahead of themselves, not to say in bubble-like territory, because I still think that long-term that will continue to be the best performing sector in India over the next three or five or seven-years.

But what I would say though is that if the market was rising because of strongly improving fundamentals, then I would not be concerned. If fundamentals were improving gradually and there was multiple expansion-that also would not be so much of a concern. But with this huge influx of liquidity, I think USD 16.7 billion has come into the Indian market this year, USD 3 billion of that just in the past month, I think the trend is accelerating-that to me is a little worrying because just as quickly as that capital comes in, it goes back out again.

India was doing well for good reason. I don't ever compare India to China because just structurally that market is very different. It is an inferior to India. The economies might be comparable but I don't compare the Chinese market performance to India maybe look at Brazil. Brazil is up 4.5-5% in local currency terms; India is up 10-11% and for good reasons. But I think there are as you hinted a few sectors like banks where people are getting a little too excited.