Mkt won't correct below 4500: Nilesh Shah, Ashwini Agarwal

Here is a verbatim transcript of the exclusive interview with Nilesh Shah and Ashwini Agarwal on CNBC-TV18. Also see the accompanying video.

Q: Do you think a long elusive correction has started or do you think it may not deepen too much from where we have reached already?

Agarwal: It is hard to say at this point in time because the cues are largely global not local. There has been a lot of inflow coming into emerging markets from the whole of India. It is clearly benefited from that trend and that is what has held up stock prices so far, inspite of the fact that fund raising by corporates has been at near record levels over the last couple of months or so.

The market has been looking tired for sometime. I am not surprised by what has happened over the last couple of weeks. I don't know how much deeper it will go, but I think a significant upside in the short run is not something that I would expect.

We have had a massive run as you said and a consolidation has been long overdue. This is a beginning of that consolidation trend that we are seeing. We could go down another 5-7% and stay there for a long time to come, like two months or so, or we could have a sharper correction and a bounce back. Either of that is possible.

Q: While the fall has been 500 points, the consensus seems to be maybe another couple of 100 points at best and then we are done with it price wise. Do you agree or could there be surprises on the way down?

Shah: That should probably be the way the market will pan out. Above those levels of 5,000 for the Nifty, valuations were clearly challenging, they were no longer compelling. FY11 earnings were also completely getting valued and factored in. So, we have seen an about 10% correction. The highest correction that we have seen over the last six months has been about 15%, where post elections we went to about 4,700 and from there we corrected all the way down to 3,920 post budget. This was a correction of about 15-17%. We have seen a 10% correction and might probably see another 5-7%, where the market could probably go down to about 4,500 Nifty. At those levels, valuations would again become reasonable. At those levels, the markets would probably be trading at about 17 times current year earnings and at about 14-15 times one year forward earnings, which would be reasonable for a growth market like India and in an environment where corporate earnings are growing at a pretty fast pace.

By and large, we have seen a fair bit of the correction, maybe we would see another leg of the correction also but that is where the market should consolidate.

Q: Its an interesting time for investors, they are not quite sure whether this is the point they should get in, if they have been left out earlier or they should wait a bit longer. We have had a 9,000 point Sensex rally from roughly 8,000 to 17,000, do you think it is probable that the market gives up a third of those gains and recalls to 14,000 kind of levels?

Agarwal: if you take a standalone India, I would say that is not something that I would bet on. But if the rest of the world goes into a corrective mode, for facts or issues that are hard for us to predict right now, that's possible. I would be inclined to believe that we don't have a significant downside from here, but I also don't expect any near-term upside. If investors who are feeling left out want to enter, they should take a medium-term view. I would say another 5-7% down and you could expect a 20-25% upside with a 12-18 month outlook. But if people are getting in now and are expecting to make 10-15-20% in the next two months, everybody can get lucky in this market place and it can happen, then I don't think that script is likely.

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