Experts see Nifty range getting narrower going forward

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

The markets have begun the week exactly how last week was -- trading in a narrow range. The Nifty closed eight points lower with the Sensex down one point. Continuing the trend of last week, the broader markets underperformed the frontline indices. The Midcap index ended 0.4% down, The Smallcap index is down nearly 1%. As a result, the market breadth ended at 1:3 in favour of declines. Volumes were low as well, with only Rs 76,000 crore clocked as the turnover in today's trade.

With positive industrial productivity data and food inflation in February inching towards the double-digit figure, there are concerns that the Reserve Bank may act as early as this week to tame inflation.

Correction, consolidation, or an upmove:
Technical Analyst Ashwani Gujral does not see more than a 200 points breakout or breakdown for the Nifty. "I do not think we are positioned for a breakout above 5,150, at least not sustainable, because the broader market is giving up. Gains are quite limited and that too limited to a few spaces."

A Rangebound market is also Nilesh Shah, MD and CEO, Envision Capital, call. "The range is more like 4,800-4,900 on the lower side and 5,300 on the upper side. There are also several headwinds which have cropped up in terms of higher interest rates, higher raw material prices, higher inflation, and higher issuances. Our sense is that this market will remain in a range which can get narrower."

Similarly, Ajay Bagga of Deutsche Bank expects a rangebound market in the near-term. He does not see the Nifty cracking below 4,900. "Fundamentally, we are going to see earnings upgrades in this market over the next 6-8 quarters. For the next financial year, we are forecasting earnings per share in the range of Rs 1,260-1,280 for the Sensex. Maybe as much as Rs 1,300 once more clarity comes through. At some point, those are the kind of earnings dominators that will get fed into these prices. That is where you would really get a compelling valuation-based floor for these markets as such."

Mehraboon Irani of Centrum Broking advises investors to be a little bit defensive. He is betting on IT in the current scenario. "In the short-term, trying to make money in this market is not going to be easy."