Nifty to stay in 5500-6100; hold quality stocks: Edelweiss

Nischal Maheshwari of Edelweiss Financial Services believes that the Nifty will move in the range of 5500 and 6100 levels. His sense is that market is in a broad trading range, on the downside it will not go below 5500 levels and on the upside not above 6100 levels.

He told CNBC-TV18 that there is going to be huge amount of volatility, but in that range. Depending upon events, whether domestic or the international, market will keep on moving up and down. Also read: Rupee likely to hit 54/$ next month: Barclays Capital Below is the verbatim transcript of his interview to CNBC-TV18 Q: Are you taken aback by this kind of move or would you say that this risk was always there with the kind of liquidity driven rally that we had? A: Market has been in a volatile state. As you were saying, it was a liquidity driven rally. So I think these kinds of sudden moves would definitely be there because markets will wait on some news. Yesterday it was the US news basically where people were expecting Ben Bernanke to come out and make a statement, which was positive. However, if one goes through the details of the Federal Open Market Committee (FOMC) meeting, which was held in the first week of May, I think there quite a few of the members are of the opinion that the quantitative easing should be down away with by as early as Junes. I think that is what has spooked the market. Today morning also in case of Japan, the prime minister didn’t give a very dovish statement, so that spooked the Japanese market. So, it is all a liquidity driven rally and everywhere the reaction happens simultaneously. Q: Do you see this fall that we have seen in today's trade as a reversal of the upward trend that we have been seeing or perhaps is just a little bit of profit taking and the markets could perhaps consolidate, just slip a little more but the trend remains intact? A: My view remains to be that this market is in a broad trading range only. So there has been no breakout though it had crossed 6111, which was last year's high. However, I believe if this is a broad trading range downside I don't see below 5500, upside I don't see beyond 6100 and this is a broad trading zone. Depending upon what events happen, whether domestic or the international. This is a year for elections so news will keep on coming. I think this is a broad range which the market will keep on moving up and down and there is going to be huge amount of volatility. Q: Do you expect some more pressure or tapering off as we head into the F&O expiry? A: Definitely and since it has been a very short period of time that he want to raise USD 2.2 billion by the private sector guys by June 3. So, I think that will suck away quite a good amount of liquidity for the secondary market. So, some amount of profit taking will definitely happen, given the expiry is also approaching and USD 2.2 billion is a large amount number over the next 15 days. So, I think that is going to put pressure and once again come August 08, another billion dollars of secondary market has to be raised for the PSUs. That is also going to put a bit of pressure for another one month. This cumulatively taking out close to around USD 3 billion from the secondary market especially, that is going to put pressure. Q: What really is going to be the next cue for the market because earning season will now be over in next week? You think the market will keep watching for global cues and especially the liquidity picture because for now we are seeing quite a bit of Foreign Institutional Investor (FII) inflows though they are being compensated by the Domestic Institutional Investor (DII) selling that we have seen recently? A: I would watch out for two things, one is the rupee level actually and that is very crucial. We are at 56 right now so that is going to be very crucial. My diesel difference what had gone down to Rs 2.5 has now gone back to around Rs 5.5. So, one is rupee and that may bring back inflation. So, I will continuously watch it very closely. Second thing is monsoon because that also has got a potential to bring back inflation into the system. So these two things will be monitored very closely in the market. Q: How to go about investments now, would you wait for some more correction? A: For the moment we have been recommending our clients to continue to hold quality stocks. Stocks where cash flows are very strong and management quality is pretty good. Whether it is pharma, FMCG, IT to an extent, these are the stocks which one should be accumulating at these levels. I expect some more correction to happen. Definitely 5800 would be a good level to start nibbling in the market.