Check out: Anand Rathi Financial's top picks in the Nifty

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Check out: Anand Rathi Financial's top picks in the Nifty

In an exclusive interview with CNBC-TV18, Rajan Malik, Director -PCG Advisory, Anand Rathi Financial, speaks about the markets and gives his outlook going forward.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS See mkts hit new all-time high by Budget: Ambit Holdings See Nifty heading towards 5550 by mid-Aug: Deven Choksey Nifty heading higher, upside target at 5700: Daryl Guppy 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

In an exclusive interview with CNBC-TV18, Rajan Malik, Director -PCG Advisory, Anand Rathi Financial, speaks about the markets and gives his outlook going forward.

Axis Bank , Larsen and Toubro , Bharat Heavy Electricals (BHEL) and Tata Motors are his favourite picks in the Nifty.

Here is a verbatim transcript of the exclusive interview with Rajan Malik on CNBC-TV18. Also watch the accompanying video.

Q: Since the last time you were here, the market has inched up and has made a new intermediate high, but is still struggling at around 5,400 levels. Do you think it is just a bit of consolidation and we are headed towards 5,500-5,600 next or you think you now made a sort of intermediate peak?

A: Yes, the markets have been inching up. There has been a lot of sectoral rotation with time, but we need to watch the breakout of the range. Every time the markets, over the last eight-nine months, they have been giving us higher tops and higher bottoms. So for us to get out of this range we now need to trade over 5,530 to 5,540. It is difficult looking at the fact that you have settlements next week. The way derivatives positions have been built up at 5,500, it looks unlikely we will be able to get there, atleast during this settlement. Then we will watch what kind of rollovers have taken place and the international cues coming into see, if you really can sustain these higher levels.

Q: Since the markets appear to be ranged, the name of the game appears to be bottom-up or looking at individual stocks. What has excited you from the results pack? If we can begin with the banking space since many of them have been announced, can we begin with a public sector space? Canara Bank came out with very good numbers, would you buy anything in that space?

A: Canara has been the only stock in the public sector space which has come out with very good results. But in the private sector space, we continue to like IndusInd and also HDFC Bank .

What is important is not the markets today are discounting certain performances by banks. It is not that the corporate sector will not perform well. What is going to be more important is whether these performances are in line with expectations and what is priced in into the markets at these levels.

Q: Where is the headroom, is it there in any of the banks or would you look for headroom in capital goods? Where are you seeing the chance of market outperformance?

A: Capital goods and the banking sector both these are sectors which will continue to grow on the domestic demand story. So, if you are bullish on the India growth story, you have to be bullish on these two. Also, the fact that 23-24% of our Nifty weightage is for the banks and another 7-8% for the capital goods and maybe 17-18% for oil and gas. So, we have to watch out, if these sectors actually go and perform better than expectations for us to really create a rerating of the expectations for financial year 11-12.