Stay out of telecom for next few quarters: Kotak Sec

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Stay out of telecom for next few quarters: Kotak Sec

In an interview with CNBC-TV18, Sanjeev Prasad, Head of Research, Kotak Securities, spoke about his reading of the market and his outlook.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS JPMorgan bullish on Educomp, sees target at Rs 1000/share See IDFC SSKI's market outlook/stock picks for this year 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 Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Hindustan Petroleum Corporation | Educomp Solutions | Reliance Industries | Oil and Natural Gas Corporation | IVRCL | NCC | Bank Of Baroda | Union Bank of India |

In an interview with CNBC-TV18, Sanjeev Prasad, Head of Research, Kotak Securities, spoke about his reading of the market and his outlook.

Below is a verbatim transcript:

Q: How are you feeling about the market now, we were threatening to breakdown but we have come back again, do you think the correction is over or you expect more downsides?

A: I think the market is looking recently fairly valued at current levels. So the whole issue now is how would the global cues be and what will happen to global flows and that is what determines the movement in the market now. So I wouldn't be surprised if the market goes down 10% from where we are or it could go up 5-7% also as money keeps coming in.

Honestly, as far as local factors are concerned, I don't think they are going to matter that much. Valuations are fully reflecting even fiscal 2011 numbers-earnings upgrades-are not happening the way they would have had; if you look at Q2 numbers, I don't think they were anything great for people to take up the numbers significantly. In fact we cut down our own numbers-we are at about 3% both for fiscal 2010 as well as 2011. So I don't think there are any real triggers for the market as far as fundamentals are concerned. It is all going to depend on global factors and I guess more importantly flows now.

Q: What does that mean for the market in terms of a range or a band now?

A: It is hard to guess but my sense is one should take a call, maybe 15,000 on the lower side and maybe 17,500 on the upper side. That is probably a good band to look at because if you look at the markets currently it is almost at about 18 times of fiscal 2010 numbers. Even on fiscal 2011 numbers, we are looking at a market which is about 15 times now and if you exclude the energy sector where the valuations are naturally lower and which is a big component of the index then you are looking at a market which is more than 19 times on 2010 and about almost 17 times on 2011.

So clearly the market is very fairly valued. So now we have to wait for some triggers to come through either in the form of some earnings upgrades or whatever which I don't think is really happening. In fact I am a bit worried about earnings numbers particularly in an energy or cement sector and then what the government does and obviously what is going to happen globally. As of now, the global consensus view seems to be that none of the central banks are going to tighten in a big way; you will see loose monetary as well as fiscal policy continuing for maybe the next six months. So maybe the markets are going to respond from that.