Fundamentals not supportive for extended rally: MF Global

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Fundamentals not supportive for extended rally: MF Global

Rajan Malik of MF Global expects the Nifty to top out at the 5,000-5,100 levels in the near-term.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » 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 Infosys BSE | NSE 29/05/12 Are Mutual Funds betting on Infosys? Other Stocks in this news ABB | GMR Infrastructure |

Rajan Malik of MF Global expects the Nifty to top out at the 5,000-5,100 levels in the near-term.

Indian equities had a good start to the new year, however, yesterday's disappointing Q4 guidance by IT major Infosys had investors worried once again.

"We expect Infosys to remain rangebound," he says adding, "...valuations right now look supportive."

According to Malik, market technicals did suggest a corrective rally. He says the upcoming elections, the ongoing earnings season and of course global newsflow remain the key catalysts for the market.

In the meantime, he continues to remain cautious on the market. "The correction post rally close to 5,100 could be steep," he says.

Malik advises against deploying any significant cash at this point. He feels the fundamentals are not supportive for an extended rally.

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

Q: How have you read this uptrend that began in the last fortnight or so, do you see it as temporary or do you think something is changing?

A: The market technicals were suggesting that the market needed to go up slightly, it is doing just that. We do believe it may have little more legs and one could see levels of 5,000-5,100 on the Nifty. But, we continue to believe that this is only a corrective rally and that the market would once again inch down on domestic and global concerns. Tailwinds have been pretty decent out of the US and Europe recently. The international markets have supported this rise in the domestic markets.

Given the fact that you have got domestic elections, which to our opinion would be very important now, we believe it's very necessary for the government to come out of these elections stronger than they went in for really something to happen in the next half of the year. Given that we will keep our eyes on the elections and the fundamentals and the earnings season before we take a call on the markets.

Q: What would that imply in terms of corners or boundaries that you would set on the market now, both in terms of upside potential and downside risk?

A: We believe 5,000-5,100 would be on in the market on the upside. But we would not take a call on the downside because the downside could be pretty steep from these levels also.

Q: The market has been marked by this last week is the big pick up in the broader market activity, do you see that backed up by any retail or HNI interest where a lot of the midcaps or the non-index faces?

A: Yes, there has been lot of money on the sidelines waiting to get in. Money will come in on all these bounce backs, but we continue to remain very cautious. While there was a clear trading opportunity, we treat it as a trading opportunity. I don't think anything has changed fundamentally to take a call and put a lot of money at higher levels.

Q: What do you think the market will slip on next? A lot of the bad news in terms of macro has been spoken about. Do you think there is anything new which might trigger the next wave of the down leg from wherever it starts from again?

A: Let us taken an example of what happened to Infosys , the stock just sold off 8-9%. This market is not ready for any negative surprises and the glass is half empty or half full, as you may like to take it. We do believe that the fundamentals would take a little more time before they really create a situation for a broad based secular rally. Until then the market weight will take it down. It does not look like the market will get the fundamentals required to take it to higher levels. Once the upside looks a little capped then the downside levels will always remain open.

Q: What do you with a stock like Infosys after what happened yesterday?

A: The stock on relative valuations does not appear too expensive at Rs 2,600 given the fact that you may have Rs 147-150 earnings. It is very important to see what happens to the guidelines and the guidance for next year. Until then we believe the stock may be very range bound.