Nifty upside capped at 5200-5250: Sharekhan

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Mkts to test Jan highs in next few weeks: PN Vijay Odds of mkts hitting new highs in 2010 low: Morgan Stanley Experts see Nifty at 5300 levels, differ on timing 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 Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

In an interview with CNBC-TV18, Hemang Jani, Senior Vice President, Sharekhan, spoke about his reading of the market and his outlook.

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

Q: How much more time do you give this leg of the rally?

A: We think that overall sentiment is definitely good. What is heartening to see is that the foreign institutional investors (FII) flows have become very strong in the past few days. But we feel that there is not going to be any significant upside to this market primarily because of two concerns. One is of course that we have not seen any great earnings upgrade even post this Budget.

Secondly, in the next four-six weeks time we are going to see some kind of a tightening measures being taken by Reserve Bank of India (RBI). So because of these two primary concerns and the fact that we are already at about 16.5-17 times Sensex PE that does not leave much of a scope for an upside. So we think that the maximum upside could be somewhere around 5,200-5,250 for the Nifty.

Q: On the divergence that we are seeing in today's trade, the midcap index is underperforming while the smallcap index is outperforming, what is your sense because that's a peculiar trend that we have seen in today's trade? What could explain that?

A: I think after the sharp run-up that we have seen in some of the largecap names particularly automobile and some of the other high beta names in the metal space, now the retail interest is coming back into some of the midcap and smallcap names. We think that the overall volume even there isn't that encouraging, so I am of the view that one needs to be little selective when it comes to some of these midcap and smallcap names.

Q: What looks like the weak link in the Sensex or for that matter the heavyweight since you are skeptical about it going beyond 5,250 marks? What would be the weak link?

A: I think the banking would be one sector where one could expect underperformance in the short-run particularly from the public sector undertaking (PSU) banking space, the larger names. Ofcourse the oil refining space from both Budget perspective and the fact that we have not seen any benefit to them even with the recent petrol and diesel price hike, these companies are incurring losses of about Rs 250-275 crore a day, so that is where you would see some kind of weakness. Even ONGC , which is a high weightage in the index, because of this kind of losses being incurred by the downstream companies, eventually ONGC will also feel the pressure there.

Disclosure: It would be safe to presume that I personally and my company have interest in the stocks that I have talked about.