See Sensex at 21500 by March 2014: Karvy Stock Broking

In an interview to CNBC-TV18, Varun Goel, Karvy Stock Broking says in the short-term, the market continues to be determined by the resolution of the Parliament session. "In the short-term, the market is going to largely reflect the movement there," he adds.

However, he is looking at 21,500 on Sensex by March 2014. "That is based on 15 times FY14 earnings. We believe that the market has more than 15-16 percent upside from here till March," he asserts.

Also read: Expect earning growth; 10-15% market upside in FY14, says Religare

According to him, the earning season has been better than expectations. "The ex-energy earnings growth has been more than 15 percent. Clearly, we have seen the bottom, as far as the earning cycle is concerned. Once we move into January, February and once we see a rate cut, I think the market definitely will take the next set of trigger from there. In the mean time, it is going to be more midcap and bottom-up stock picking," he elaborates.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra.

Q: Where do you think we are going to close up expiry?

A: In the short-term, the market continues to be determined by the resolution of the Parliament session. The market continues to see some kind of legislative action being carried out in Parliament. In the short-term, the market is going to largely reflect the movement there.

Q: How would you see the Nifty going? Up to the expiry, do you think the pressure will hold on above the 5,700 mark?

A: The market definitely looks positive to us at this point of time. Clearly, the earning season has been better than expectations. The ex-energy earnings growth has been more than 15 percent. Clearly, we have seen the bottom, as far as the earning cycle is concerned. Once we move into January, February and once we see a rate cut, I think the market definitely will take the next set of trigger from there. In the mean time, it is going to be more midcap and bottom-up stock picking.

Q: What kind of gains can the market make?

A: We are definitely looking at 21,500 on Sensex by March 2014. That is based on 15 times FY14 earnings. We believe that the market has more than 15-16 percent upside from here till March.

Q: There has been a bit of resilience coming in for the broader markets as compared to the Nifty. The Nifty has pretty much been rangebound. Would it be more of a stock specific approach with regards to may be the broader markets as opposed to a call on the Nifty?

A: Definitely. In the last couple of months, the Nifty has been more or less rangebound . The midcap stocks have been doing quite well. For the market, as a whole, the next set of triggers could be legislative actions by the government and ofcourse the RBI policy. In the meantime, there are a lot of midcap ideas especially in private sector banking names, FMCG, Pharma, and even automobiles, which have started to move up in anticipation of better corporate earnings in the next few quarters.

Q: How would you approach high beta in such a market?

A: We would like to wait for the actual improvement in fundamentals, before we take an active buy call in most of the stocks. As far as real estate space, capital goods and construction space are concerned, I think the macro economic recovery is still two-three quarters away. We would stay away from most of these stocks at this point of time.

Q: Would you be positive on the IT space?

A: Looking at the valuations, they seem to be quite full to us at this point of time. Most of the rupee play has already happened. I don’t think there is too much upside that the IT companies can have from the current levels. As far as the macro economy over the sector is concerned, especially the demand side, it continues to be under pressure. The pricing has been under lot of pressure in last quarters result. So, for us, IT is definitely an underperformer at this point of time.