Mkts could drop further, Sensex seen at 12,500: Religare MF

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

Q: On financials, you have picked HDFC Bank, something the market is sulking with about numbers today. Are you a little concerned about what kind of slip-ups there might be by way of financials and their earnings?

A: On the sector per se, I think there are still some issues in terms of the pass-through of NPAs that are happening. On a relative basis, we have been more positive in the recent past, on the non-bank financial space where you have got both project finance companies, which are the state owned companies, and you've got the pure mortgage finance companies where they are benefiting both from easy liquidity as well as continued sort of stable growth on the asset side.

So, we have been exhibiting a degree of preference for them over the banks. I think the banks have to still work their way through some of the hits that they are taking on the NPA cycle.

Q: What do you see for the market over the next three-four months? Do you think essentially a ranging kind of market or do you think we are still going to be very volatile and have 20-25% swings in either direction?

A: Ranged, for certain. We thought there was a ranged trading market even about four months ago, except I think where we didn't realise how volatile that range could be where for the first time that I can recollect I have seen a 100% move in effectively three months flat.

I think where that is coming from is essentially the fact that all the global markets seem to be intensely correlated and the volatility seems to be very high across all risky asset classes.

So, I would continue to say ranged trading but I think as far as volatility is concerned, I've learnt my lessons from the last three months and I would continue to expect it to be a little more than what you would normally expect.