Here is a verbatim transcript of Udayan Mukherjee’s comments on CNBC-TV18. Also see the accompanying video.

On the market mayhem:

It was not one of the worst weeks – it was the worst week ever. The market down 15% is as bad as it gets. It is completely unprecedented and unexpected. One does not expect to see largecap names lose 25-30% of their market cap in just one trading session flat. That’s exactly what has happened today and there are lots of reasons and lots of things which have happened in the market from Infosys, to the cash reserve ratio (CRR) cut, to the Index of Industrial Production (IIP) number, to the Finance Minister and the SEBI statements – it has been very eventful as a day.

But at the end to look at stocks like Reliance Communication down 23%, ICICI Bank down 20%, Reliance Infra down 20% - stocks in the index giving up 1/5th or 1/4th of their market value in a single session, tells you what path sentiment has come at, at this point in time. So global panic, bad local macro numbers and nobody wants to buy – there are only sellers in the market – this is classic capitulation and a bear market in full flow.

It was debilitating week for sentiment and while it has been looking oversold technically for the last couple of days, but that’s not making any difference as one can see on the screen.

On IIP numbers:

The number could be one-off but we have seen a fair number of poor IIP numbers over the last six-months. Some numbers have been okay, some have been pretty bad but the message is clear that things are slowing down quite substantially in the economy. There is no doubt about that and one would see repercussions of that not only in GDP growth but also in earnings growth – that is something which is worrying the market. So that 1.5% number might be an aberration.

It may or may not be but a lot of people in the market and in the economy seem to be in denial mode as well. They refuse to take on board any poor economic number, just wishing it away as a bit of an aberration and focusing only on the good numbers which come in.

I think the message is quite clear even if you look at or tab the newsflow from the ground that things are slowing down quite substantially and we may end up with a macroeconomic backdrop which is not as favourable as people would have us believe. That number hurt sentiment quite a bit and the market is quite convinced that things are indeed slowing down, this IIP number being an aberration not withstanding, which is why despite several protestations and clarifications from various sources, the market still closed down 7% and I wouldn’t be so sanguine that the market has not got it right.

On CRR cut:          

The Reserve Bank of India is doing the right things. First things first, it has to inject more liquidity. It will have to do more. So I wouldn’t be surprised if more CRR cuts come in the next fortnight I wouldn’t even be surprised if interest rate cuts also happen, though that it is not consensus expectation at this point in time. But as one has seen in the west, these things are not quite working. They need to be there. The market takes on board, accepts the large – which is being given and then just hammers stock prices down even more.

So while this is a help, it will ease liquidity in the system – may be cool call rates a little bit – but bankers have been on record saying that this will not ease lending rates in the system and banks might even choose to hold on this liquidity and not lend it out because of the kind of industrial growth situation they are witnessing. So it is not like this money will come into the system. It might just lie with banks who might want the cushion of extra liquidity at this point in time. Will it ease the margins situation which brokers and bankers are facing at this point? May be somewhat but even so I doubt whether this will have a hugely material impact on how things are progressing.

Is the market oversold? Are things getting overdone? For sure they are but that’s how typically things happen in bear markets. In bull markets too they were getting overdone, since November-December-January and now we are seeing the opposite end of it and that might well continue for a bit longer. So yes, short answer to this – the regulators are trying both globally and locally and they will do more to alleviate the pain but barring short-term bounces which might happen because of these measures in the medium-term we will still have to go through very rough times.

On ICICI Bank:

The market has such conviction in hammering a stock down so continuously despite all sorts of clarifications coming in. Look at the sequence of events. The management has clarified not once, not twice, but thrice. The RBI has clarified; the Finance Ministry has clarified that ICICI Bank does not face any kind of problems, and yet the stock falls at the rate of 20-25% a day, which tells you that the market probably knows something that we do not.

The market is a very clever beast. When clarifications are given and the market takes it on board, then there is no reason to fall like this. You can see that ICICI Bank probably does have a fairly reasonable liquidity position if not an utterly comfortable one. It doesn’t seem to be in any kind of problem that western banks seem to be in. Yet the stock price is falling.

I doubt whether this is any kind of concerted bear hammering or anything like that. My fear is that the market knows something that we are not aware of today, which might unfold over a period of time. I hope that the market has got it wrong. For the moment, we take the management’s clarification at face value, and it doesn’t appear that ICICI Bank has any kind of liquidity problem or is about to go belly-up or anything like that – far from it. But the screen makes you worry quite a bit about how things are progressing.

On Infosys:

Infosys is a conservative company, and it always has been and will continue to be. Therefore it is no surprise that it has come out and said that it needs to lower its dollar revenue guidance and dollar profit guidance.

It is important to understand why the market is focussed on the dollar revenue guidance because the market pretty much wants to know at this point what Infosys’ take on the business flow going forward is. It is not worried about reported numbers, whether because of the rupee versus the dollar or the dollar versus the euro, the reported numbers in rupees moves up or down. It wants to know whether core business for Infosys is going to slow down dramatically.

Principally Infosys bills in dollars. Therefore the dollar revenue and the dollar profit guidance is what the market is taking as a proxy to what Infosys thinks about its business going forward and maybe justifiably so. That revenue guidance got cut down 5%, the profit guidance got cut down 5% from its peak, and that worried the market quite a bit.

Infosys fell to Rs 1,050 in the morning and maybe it will not fall below Rs 1,000 because it gets valuation comfort, it goes into single-digit P/E multiple something that we have never seen in Infosys, and maybe it will not fall. So, the downside could be restricted to Rs 1,000. But upsides I suspect will be capped from here about Rs 1,300 odd because of the kind of murky visibility in dollar earnings that one is seeing, and what the management confirmed today.

On markets this week and the week ahead:

Enough damage has happened this week in four trading days to lose 15%, which is something that one doesn’t expect. I have been saying throughout this week that the market seems a bit overdone on the way down, and at least a technical pullback is likely and plausible. That has not come this week. That expectation has been belied. I hope it fructifies next week.

So, I don’t know whether next week again if there is more global turmoil tonight, the Sensex and the Nifty fall further and maybe the Sensex falls to sub-10,000 levels, and from there maybe there is more regulatory action, and the market moves back. But essentially for the moment, it appears that between 3,000 and 3,800 Nifty, and between 9,000-9,500 on the Sensex on the way down, and I suppose 11,000-12,000 on the way up, the market is probably rangebound. There could be more downsides. But on a day-to-day basis it is very difficult to predict.

For investors probably it is too late to sell. We are less than half of the index level of January. I think if you haven’t sold already you can hardly sell stocks that are down 80% from their peak values. So, it is tough to sell at these prices. Is it easy to buy? Not quite yet. So, I think investors should probably sit on cash, and not sell in a panic. They should probably not do anything and just watch the situation unfold over the next few days.