SENSEX NIFTY
Feb 24, 2012, 02.07 PM IST | Source: CNBC-TV18

Union Budget 2012: Don't see a correction of more than 3-5%: Emkay Global

The Indian market has had a great run in the first two months of 2012. Krishna Kumar Karwa, managing director of Emkay Global Financial Services says, the market has moved up almost 18%, it should be in a consolidating mode. However, he doesn't see a sharp correction of more than 3-5% in the market.

The market should be range-bound or cautious before the UP state elections results and the Budget.

Kumar Karwa

MD

Emkay Global

The Indian market has had a great run in the first two months of 2012. Krishna Kumar Karwa, managing director of Emkay Global Financial Services says, the market has moved up almost 18%, it should be in a consolidating mode. However, he doesn’t see a sharp correction of more than 3-5% in the market.

There are important events in the month of March— UP state elections results and the Budget. Karwa  says, the market should be range-bound or cautious before these events. “It should be a cautious timeframe for the next 10-15 days,” he asserts.

According to him, there is a resistance at around 5,500-5,600 odd levels.

Also read: A correction would be healthy for market, says Anil Manghnani

Below is the edited transcript of his interview with CNBC-TV18's Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: We have run very fast and very hard for the first two months. What’s your sense of what we are getting into in March— some range-bound movement for the market or is momentum too strong on the screen right now?

A: The market has moved up almost 18%, it should be in a consolidating mode. In the last few trading sessions, we have seen that there is a resistance at around 5,500-5,600 odd levels.

There are important events in the month of March— UP state elections (results) and then the Budget. So, the market should be range-bound or cautious before these events. Post these events, based on the kind of announcements, you could see further upticks or downticks for the markets. So, it should be a cautious timeframe for the next 10-15 days.

Q: If the stance is caution at this point in time, what do you suggest investors should do? Should you continue to hold on to your positions or do you think profit taking would be the prudent strategy at this point?

A: If you look at the FII flows, they are still positive. So, to that extent, there is liquidity driven inflow which are coming in. But if you look at the domestic investors, they are adopting a very stock specific approach and taking money off the table or reducing the beta on their portfolio in the current scenario. So, it is more a question of which way you are. So, domestic investors are looking to selectively book profits.

Q: Through these last two months, the market has been quite stubborn about letting up too much ground. If you sense downside risk here, how deep do you think the corrections might be?

A: There is an element of left out feeling amongst domestic investors. They have not been able to capture the whole rally. The rally was too sharp. It didn’t correct for people to be able to enter. So, based on that, if you look at it then maybe at 3-5% cut, there would be a domestic support coming in. So, as of now barring unforeseen circumstances, it does not look like that there can be a sharp correction of more than 3-5% in the market. That also would be led more by FII taking money off the table or some selling from the FII rather than any domestic led selling.

Q: We have seen a lot of these close block deals happen on some of the financial names. How would you read that? Would you sense that’s the way appetite is pushing right now amongst the institutional investors— they want to pick up large bite size chunks of some of these companies?

A: The transaction of almost Rs 10,000 crore of HDFC just shows the appetite amongst investors for quality stocks. I hope the Government of India is also watching this and they are able to push through some of the divestments that they want to do. Obviously, there is very good demand currently for quality stocks. So, net-net, there is good demand for quality stocks. This is a very positive signal for the capital markets.

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