Markets likely to be choppy: Ved Prakash Chaturvedi

In an interview to CNBC-TV18, market analyst Ved Prakash Chaturvedi gave his perspective on the markets.

Here is the verbatim transcript of his comments. Also watch the accompanying videos.

Q: Do you sense panic in the markets?

A: The macro headwinds in higher global commodity prices, high expected inflation in emerging market, policy tightening in India is causing concern. The market was anticipating close to an 18% earnings growth for fiscal year 2011-2012.

There is concern and near panic and I guess a lot of it is related to the macro issues. I still suspect that when you are speaking to companies at the micro level individual companies are still saying that they are seeing robust orderbooks, they are seeing good earnings growth.

Q: There has been a literal dumping of stocks or sectors over the last two trading sessions. Something is troubling the market aside from these macro issues?

A: I think there has been pull out of money from emerging markets. Data shows that between USD 7-8 billion has been pulled out of emerging markets in general in the first one month and I guess that is something which is really spooking the market. Contrast that with USD 95 billion of inflows in emerging markets in 2010.

Also the fact that local markets in the west, US, other markets are looking more attractive in terms of valuations more certain, better flight to safety. I think all of this is coming together at this point of time. So, my sense is that much of what is there in the newsflow was known but I guess some of the reaction to all that is happening together at this point of time and we have seen some blood on the streets.

Q: Where will it stop for infrastructure and real estate space?

A: I think the concern is that the macro policy environment with respect to some of these sectors will become extremely cautious and hence a project approvals, project execution, making funding available, commercial lending will all slowdown significantly and in addition to the other concerns of inflation and higher cost prices or raw material. This added concern is now paying seriously on the minds of investors and on the minds of companies and I guess we will have to wait it out.

My sense is that there will be three major trends in 2011. I think the first half, we will see inflation, interest rates going up and towards the middle of the year interest rates will peak out and so the first half will be a rough period of macro headwinds. I see that towards the second half of the year interest rates will peak out, value will emerge, the appetite of global investors want to go back and some of the developed markets would have been satiated.

This economy cannot keep growing at the rate that we have seen in the past unless we are addressing infrastructure. We all have heard that and hence at some point of time some of these concerns will begin to fade away.

Q: The bigger concern for the market right now on whether or not the broader market is already slipped into a bear market kind of zone?

A: I would agree with you. I personally feel that the bottom of the market is not too far away from where we are at right now though I don