Nifty likely to be volatile, may touch 5100: Dilip Bhat

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Nifty likely to be volatile, may touch 5100: Dilip Bhat

As the market are losing modestly, there is a growing concern if there is more downside on the cards. In an interview to CNBC-TV18, Dilip Bhat of Prabhudas Lilladher said that the market is likely to be volatile and Nifty may correct to around 5,000-5,100.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Nifty trades with modest losses on global cues; IT slips Global cues sticky, may affect market 10 cues you shouldn't ignore before initiating trade today Sensex, Nifty rise 1.3% in August series F&O check: Sectors that will lead September series 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

As the markets continue its losing streak, there is a growing concern on its downfall. Though some of the experts are still bullish on the markets, many think that a further correction is just round the corner.

In an interview to CNBC-TV18, Dilip Bhat of Prabhudas Lilladher said that the market is likely to be volatile and Nifty may correct to around 5,000-5,100.

However he did not even rule out the possibilty of Nifty going up by 5,500-5,550 on the upside. "Nifty will probably have to spend either time wise correction or sideways correction," he said.

For long term investors, Bhat suggested holding on banking stocks. In the short term, he recommended selling capital goods and auto stocks.

Here is the verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Do you think it's the start to the kind of correction you were talking about to 5,000-5,100 or may not be as deep as that?

A: I still maintain that by October end somewhere, we should see Nifty correcting to around 5,000-5,100. That still very much remains on the cards as far as I am concerned. The market probably will be a little more volatile as it comes down.

At best probably Nifty can go up by 5,500-5,550 on the upside. Nifty will probably have to spend either time wise correction or sideways correction. I have always been maintaining caution should be the watch word, because the margin of safety has become very narrow on the back of a very strong liquidity inflow which has been the basic argument of all the bulls.

Q: What do you think will take it to that 5,100 mark? Through the last two months the market has also worked against negatives like earnings disappointments and come out okay?

A: By and large, most of the bull markets are liquidity driven. This market is also at the moment largely liquidity driven. Unfortunately the valuations do not complement that kind of optimism at the current levels. Markets have become very vulnerable to whatever happens maybe in the US and maybe Europe.

Not that they will happen but if it happens then possibly we will be the first to give off. From the current levels, even if one were to think that markets go up to around 6,000 on Nifty then you are once again talking about something like 25.5-26 times. I am not too sure how many times in the past has market survived this barrier of 24 times.

Looking at the situation it's not just that India is growing. It's very difficult to imagine that India will continue to grow at 8-9% while the rest of the world will be in shambles. If the rest of the world recovers, I think the money will also flow back to some of these countries. Some of theses factors will probably work against the markets and markets probably will drag down gradually if not in a hurry.

Q: How would you approach some of the traditional leaders, where there are profits to be taken, space like banks and autos?

A: Banks for one has performed exceedingly well in the last two months, especially in this particular rally. I would advice, that if you are looking at the short-term not over 12-15 months, then one must hold on, because on a long-term basis one is certainly bullish, but in the run-up to October-November, one should take profits in banks, one should take profits in the capital goods segment and possibly even in auto. I think in the auto it has narrowed down now to Bajaj Auto and Tata Motors at the moment.

Q: What do you do with real estate? That showed a brief flash a few days back but has started looking wobbly once again. How are you telling your clients to approach that now?

A: Real estate has been an interesting space. It has underperformed in a big way till now. On a macro basis things look pretty good, but on a micro basis when you come for stock picking, that is where the problem starts, you are unsure whether its Unitech or DLF . Particularly Unitech because it has diluted so indiscriminately that managing that kind of float in the market is not so easy.

On a micro basis this is a sector which has places to go and one has to take a slightly longer-term view, maybe not in the short run, but in 18-20 months. Real estate sector probably from the current levels, can give a very handsome appreciation and if the index ultimately has to travel to more than 6,000 levels over next 12-15 months, then possibly this is a sector which will be one of the very active participants in that.

Q: The thrust of midcap momentum seems to have shifted to some of the midcap pharmaceutical names. Is there anything that you like and are recommending from there?

A: Not really. As far as the midcap pharmaceutical is concerned there are some interesting bets like Dishman Pharma , but probably it will be a little more long-term before they start performing as premarket expectations. I have not been having a closer look at that.

Q: Do you track Crompton Greaves , as that had an unusually large move yesterday?

A: I have not tracked this as to why it went up yesterday. I think our internal target for this particular company is around Rs 375-400 by next March to June. We are still expecting the company to grow by about 30% and the return on equity (RoE) will be in excess of 27% so that still in our buy list.