Seeing signs of economic recovery, says Axis's Nilesh Shah

The Indian economy seems to be turning a corner as there lots of visible signs of recovery. That's the word coming in from Nilesh Shah of Axis Direct. However, he says, the short-term trend of the market remains uncertain as the market is moving from an "ouch effect to a wow effect" and every news in such an environment gets exaggerated.

Also read: Too early to rejoice but see deep value in mkt: Blackridge Below is the edited transcript of his interview to CNBC-TV18. Q: The market has had quite a good run in the last ten days bouncing back from those levels of 5,100. Could there be more to this pullback? A: It is very difficult to predict the short-term market movement, especially when the market is moving from 'ouch' effect to 'wow' effect. Every news is exaggerated in terms of reflection. So, it is difficult to predict the short-term movement of the market. Indeed, the last 10 days, movement does give confidence to say that market needs to consolidate to this level. It cannot run up like this forever. Q: What do you make of the statistics that while foreign institutional investors (FIIs) bought and domestic institutional investors (DIIs) sold?  What would your advise to a DII be? Should you use this rally to lighten because fundamentals haven’t changed? A: It is not that the fundamentals haven’t changed. There are some signs of a recovery. For the first time, automobile sales have jumped up month-on-month and year-on-year and yes, last year’s base was kind of lower because of the lock-out in one of the largest manufacturers of automobile. Not withstanding that, month-on-month number of passenger vehicle sold has gone up. The exports have picked up by about 18 percent, imports have started slowing down. The fear which people had on trade deficit has almost out from peak of USD 20 billion to more than USD 10 billion. Clearly, there are signs of recovery which is visible and obviously a lot needs to be done in order to ensure that this recovery gets strengthened and it continues. The fear on the currency market has also receded significantly, steps taken by the Reserve Bank of India (RBI) has ensured that the currency instead of falling like a stone is now behaving in a far more orderly fashion. It is on its way to recovery rather than crashing. So, fundamentals have changed and that is why it is reflected into the market. The domestic institutional investors had bought when FIIs were selling in the month of July and August. FIIs put together sold about Rs 23,000 crore worth of equity over last couple of months and this month they have bought Rs 5,000 crore. Obviously when FIIs are buying, someone has to sell and domestic institutional investors who have bought when FIIs were selling, are now reciprocating. Q: Would you say that there is bottom to this market at 5,200? A: We need to take into cognizance that the broad benchmark indices do not reflect the market conditions. Just a few sectors of technology, pharmaceutical and consumer staples are holding up the market, whereas the carnage which has occurred in all other sectors including capital goods, banks, financial services, real estate, power, infrastructure, utility that has not reflected into the broader market. Keeping that in mind, the indices do not necessarily reflect the broad market. It does look like that market should be bottoming out around this range and as the corrective action starts beginning especially related to revival of investment, we could see markets moving up. The broad markets in dollar terms have corrected significantly with the currency depreciation and that should give a floor to the market in terms of how much it can go further down.