Nifty to break below 5000 to end range-bound trend: Dalton

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Nifty to break below 5000 to end range-bound trend: Dalton

In an exclusive interview with CNBC-TV18, UR Bhat, Managing Director of Dalton Capital Advisors, spoke about his reading of the market and the road ahead.

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In an exclusive interview with CNBC-TV18, UR Bhat, Managing Director of Dalton Capital Advisors, spoke about his reading of the market and the road ahead.

Here is a verbatim transcript of the interview. Also watch the accompanying video.

Q: The last few sessions have been extremely range bound-do you think this will end-this pause with the Nifty-breaking out of 5,300 or breaking down below 5,000?

A: I would place my bet breaking below 5,000 because the market has been consolidating at these levels for quite sometime, volumes have come down, there does not seem to be great interest at least domestic institutions as far as buying into the market is concerned. The only good thing has been foreign institutional investors (FIIs) have been buying into the market and the calendar for new issuances have been extremely busy.

Generally I think there is some sort of tiredness as far as the market is concerned, people are not taking big positions and they are just waiting for something to happen so that the market can breakout either way from the range. It looks like as if unless we have huge positives from these advance tax collection or estimates about how the monsoon will fair this year; the likely outcome is that people will get tired and start liquidating a bit.

Q: What did you make of the NMDC episode and the way it finally closed?

A: I think that is an object lesson on how not to price an issue especially when you have a follow on public offer (FPO) where you have very low liquidity, very low public holding and that is taken as a benchmark for pricing. I think institutions have their own way of valuing company, though it might not be reflected in those stocks which are very thinly traded and of course from a government perspective it is quite difficult to indicate a price at a huge discount to the traded price.

So I think there were lessons to be learnt and those lessons are well learned and at the end of the day the takeaway from this is that the domestic large institutions which have been big supporters of these divestments, might have to sell out in the market in order to ensure that the follow on issues of other companies are going to be a success. Therefore typically market tends to think that March-April-the insurance companies are the one who will take the market up but that might not be the case this time as far as the public sector is concerned because most of the money has already been used in propping up the divestment candidates.