Market likely to stabilise between 12,000-12,500: Kotak AMC

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Nilesh Shah of Kotak AMC believes that valuations need to come down for the market to resume its rally. He expects markets to stabilise between 12,000-12,500. He further adds that 'long-only' institutional investors will step in after another 3-5% decline.

He states that the IIP nos have not been very comforting, but it could be just a monthly blip. He feels that the CRR hike may not have a material impact on banks' earnings. According to him, after the sell-off, a lot of PSU banks have been looking attractive.

Shah expects to see some value in private banks after another 3-5% correction. He predicts that sectors, such as telecom and technology could be safe havens for now.

Excerpts of CNBC-TV18's exclusive interview with Nilesh Shah:

Q: Is there more pain left in the system, what is your feeling?

A: I think the sense one gets by looking at the last two days movements, I do not think that the pain is completely over because clearly you have seen two days of continuous fall, we have not seen any semblance of any kind of a stability.

So I think, to gauge in terms of what is the extent of pain yet left, I think we will have to wait to probably see this market stabilize for atleast one or two sessions or atleast for a few hours. This is something, which has been missing from this market.

Thankfully, ofcourse the US Fed has not come out with anything negative, which could further spoil the sentiment. But having said that, I think the leverage positions or the margin financing positions, probably yet need to be completely out so that one could say that the markets are now stable.

Q: What is your assessment of the situation, do you think it is largely a technical kind of situation like May on the F&O market etc or has sentiment been damaged by a few of the macro-signals, which have come in over the last couple of days?

A: It clearly seems to be that I think though the macrosignals have led the fall, I think they have really been the triggers for the correction. Obviously yes, the positions with F&O market were high and they were marginally high or probably at par with what they were in April and May of this year. But I think the moment those macro events happen, I that has really led to some amount of unwinding in the F&O market.

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