Vibhav Kapoor sees Nifty in 4700-5200 range in 4 months

In an interview with CNBC-TV18, Vibhav Kapoor of IL&FS, spoke about the Dubai debt crises and his reading of the marke.

Here is a verbatim transcript of an exclusive interview with Vibhav Kapoor on CNBC-TV18. Also watch the accompanying video.

Q: What can the Dubai episode do to our market? Can it trigger off bigger correction or do you think it is a buying opportunity?

A: I believe everything is global. On its own, India is doing pretty well. There are no issues as far as India is concerned. The trend largely is going to be decided by what happens globally. If the global markets get into a tailspin, because of this, then India is also going to suffer to some extent. However, I don’t think that is going to happen.

The global markets need an excuse for a correction because the European markets, the US markets and Asia have been going up very significantly over the last seven-eight months. There is a bit of complacency which has set in everywhere. So you need an excuse for a correction to happen and probably this Dubai episode will provide that excuse.

I believe that you could have a little longer duration correction, which we have had in the last few months. However, it should not change the overall picture because there is still a lot of liquidity which is going to be there. Interest rates are going to be low and so all that fundamental picture’s are still going to continue in spite of this.

While this may be one more episode in the whole picture, it is not going to change the whole situation. However, certainly it could lead to a little deeper and a longer lasting correction that we have had for sometime.

Q: This market has been struggling with its intermediate highs as well. For December, if your call is it is going to be a slightly more protracted correction, what kind of range do you foresee?

A: We have been maintaining this range of 4,700-4,800, sometimes 4,500 and higher level of about 5,200-5,300. We believe this range should continue 4,700 and 5,200 not only for the month of December as we have said earlier but till the end of this financial year because beyond 5,200-5,300, the markets will become expensive.

They are already discounting the FY11 numbers to a large extent. Below 4,500, they have become pretty attractive for long-term investors, who believe buying will always come in around these levels. So we believe 4,700-5,200 is sort of a range the market should trade in the next maybe three-four months.

Q: Do you see the possibility of Nifty going back and retesting that level of 4,550-4,600, which it did a few weeks back?
A: It is always possible if there is a lot of global panic. However, Nifty has been following the pattern of higher bottoms and tops right throughout from the time it bottomed out in last year October. We have had the last two bottoms at 3,900 and at 4,500. So if this market continues on its uptrend, then 4,700 should be a very good support level. It should make a higher bottom there. However, you could always have a sort of range bound situation where you could see 4,500 and 5,180 or 5,200, which was the earlier top as a sort of trading range. It may then last for the next few months. So 4,500 is possible, but 4,700 should be watched very carefully.
Q: If this is going to be the new problem pocket for the world though not just Dubai but generally markets in that region, would you worry about some of these infrastructure and construction companies, that is what the clearest link is right now?
A: This problem has not come out of the blue because everybody has been aware that Dubai has been in a financial mess for quite some time. Things have not improved there even over the last one year. So I believe that some of the companies have been careful in getting new business from there. However, companies, which have gone overboard and have not taken new precautions, could suffer a little bit from this.

Q: Globally, bank stocks got a bit disturbed yesterday after what happened in Dubai. Do you see any sentiment led collateral damage for the Indian banks at all?
A: There could be some sentimental selling. Some of the foreign institutional investors (FIIs), who are global in nature, could sell. The Indian banks have out performed the markets in the last few months. So the valuation comfort, which you had earlier, is no longer there. They are no longer cheap either.
There could be some sort of profit booking or sentimental selling which could happen. The Indian banking system, as has been show last year, is pretty sound. So if you get sentimental sell offs like this, it is probably a good time to buy some of these banks.

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