Liquidity driven rally; pick stocks poised to grow: Motilal

Badshah further states that it would be a good idea to look at stocks which are positioned to grow reasonably, maybe 15-20%.

Here is the edited transcript of the interview on CNBC-TV18.

Q: What's your take on the market at the moment, we have seen a significant rally off late. Do you see this sustaining, do you see further upside and if yes, what do you think will lead?

A: I think the recent rally has undoubtedly been driven by some of the large liquidity flows that we have seen in the market. This is to that extent quite a liquidity driven rally. The good part of this rally however has been that I am looking at the performances of some of the important stocks.

We have seen quite a lot of this money go into quality names and to that extent, we are seeing a substantial amount of polarization which seems to be visible in the performances of some of the good quality large cap as well as midcap names. Despite the current subdued atmosphere, they have been able to do reasonably well in the recent quarters.

In fact, it has even been borne out by the numbers that they have reported in the last quarter ended June. I think this rally will be probably predicated upon global cues. It will probably be driven by liquidity but, more importantly it will find its way into better quality names compared to it being a broad based kind of market rally.

Also read: Nifty now on the verge of breakdown: Experts

Q: Is there a good possibility of things getting a little out of whack. We have been enjoying this liquidity rally, but there are a couple of possible bad data points for us or events for us. What if the fisc is not getting adjusted at all in terms of subsidies and if it is followed up more quickly than we expect with a rating downgrade. Do you think there is this danger of this rally getting short circuited by an event like that? Do you see a revisit of 5000 or something like that?

A: You could probably see a small correction from these current levels induced by the factors that you mentioned. Market participants could use this rally in order to cut positions from a shorter term perspective. But, I would again try to draw a line between the broad market even during those conditions and even if let's say some of these issues or possibilities that you mention come about.

You will probably see a lot of differentiation within the market constituents and even within the benchmark constituents of the Nifty or the Sensex, wherein you will find things probably becoming quite inexplicable in terms of valuations or in terms of the price rises that you might see in some of the quality names. But that's probably going to be the order of the day and to that extent, it is visible.

We have seen some of the FII holdings in some of the important names, some of the frontline names which have done well. They seem to have gone up substantially in the space in the last 2-3 months. Therefore, money is trying to find a home largely in quality names.

I think that has basically going to be the character of the market in the coming months even when liquidity is good and probably liquidity is bad till the time the overall macro improves. Maybe that doesn't seem likely in the very near future.