See Nifty slipping below 4800: MF Global

The global markets have been fragile over the last few sessions. Rajan Malik, head equities, private client group of MF Global says, globally there could be further destruction. “I don’t think we are going to be decoupled. We will have bouts of volatility, we will have crests and troughs, but ultimately it appears that we could be headed down, even below 4,800, in times to come,” he adds.

According to him, the Nifty can revisit the December lows. " I see no reason why this market could go above 5,100 and 5,200 in the near-term. Fundamentally or technically, there is no reason to buy into this market," he asserts.  Rupee, he feels, may see 55-56 in the next quarter. "Once you are at 54, you could see some bit of intervention. But we don’t see a very major appreciation," he adds. Also read: Market may see short rally; rupee a big worry now, says Udayan Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: We have had quite a bit of price destruction already, are you still bearish and expect more downsides? A: We have been very cautious on these markets. We have called for 4,800-4,900 all along. Now, when we are there, it seems to have come at a time when the emerging markets seem to have fallen, but some of the larger economies seem to be drifting down. You have seen cuts happening in the US and you have got cuts in Europe. Technically, it appears that those markets could be headed way down and you could be looking at further destruction. Given the fact that is going to happen, I see no reason why domestically we will outperform. I don’t think we are going to be decoupled. Yes, we have fallen. We will have bouts of volatility, we will have crests and troughs, but ultimately it appears that we could be headed down, even below 4,800, in times to come. Q: What kind of range do you think the market may have got pushed back into? A: You could certainly see a revisit of the December lows. Let us face it, fundamentally or technically, there is no reason to buy into this market. We keep hearing the stories on valuations, but valuations are not only about excel-sheets, they are also about fundamentals, sentiments and perception. Now, sentiments and perception about India as investment destination and about equities as an asset class don’t seem to be in place. So, I see no reason why this market could go above 5,100 and 5,200 in the near-term. How far down it will go will be a function of how deep a cut you have in some of the developed economies. You certainly could lose 10-15% from here. Q: What are you recommending for your clients to do on the banking space? A: We have been out of the banking space for sometime and will continue to be out of this space. Surely, we understand that this is one place that constitutes very heavily on the Nifty. If we have a negative call on the Nifty, we see no reason to be going out and aggressively buying into the sector per se. Having said that, I do believe that this is going to be a stock specific market. One will have to buy stocks. There will be opportunities to make money in this market, even if the overall indices do not give you the money. Q: Do you see the rupee's pain continuing or do you see any kind of intervention based pullback anytime soon? A: Once you are at 54, you could see some bit of intervention like you have seen. But we don’t see a very major appreciation. 52-52.50 should be a very good place for the rupee to find support. I think it will only edge and inch up, maybe 55-56 is on the cards in the next quarter. _PAGEBREAK_ Q: There have been quite a few blow-ups on the non-index side, whether it is companies like VIP, Educomp, and IRB Infra. What are you seeing in terms of HNI and retail activity on some of these midcap names? A: We have always maintained that when there is a risk-off, we have been in a defensive mode for sometime. So, we have clearly avoided names where they can be any major surprise. Fortunately, most of our clients haven’t lost money to that level. But I must admit over here, I surely do feel the pain in people’s portfolios, the general apathy towards equities at this point in time is a function of that. So, you feel bad for people whose portfolios have done nothing. Let us also remember that we are not a country where the opportunity cost is 2% and 3%, the opportunity cost in India is 10%. That is a lot of money for you to be losing and getting into place and your capital getting eroded. Q: When you say defensives, are you saying fast moving consumer goods (FMCG) and pharmaceuticals because till a week back or 10 days back even IT was doing well, but that has become little tricky? A: IT was always a very difficult play. We continue to maintain, last quarter, there were headwinds on account of currency but that didn’t play out for Infosys, all the goodies came in for Tata Consultancy Services (TCS). You have seen the different performances within the sector. But pharmaceuticals and FMCGs, we were always overweight. I believe if you do have a major sell-off, there is going to be very few places to hide and especially in stocks. They may perform better relatively, but in terms of absolute performance, it maybe very difficult for even the pharmaceuticals and FMCGs to give you any kind of returns. Q: Any niche sectors that you guys have begun to look at things like paints or tyre companies where raw material pressure has eased off and helped the numbers largely for these companies? A: We continue to like Berger Paints. We continue to stay invested in that stock. Other than that, maybe Ceat and MRF has posted good results and Apollo could come out with good results today on the back of weak rubber prices, but that is not a sector where we would like to watch. These tend to get very cyclical. If you don’t get out on time, there could be lot of pain and it is difficult to convince clients to get out of stocks. Q: What would you tell your clients to do right now, in terms of the top three-four defensives where they should be hiding or fixed income allocation? What is the best way to park your money in this kind of an environment? A: We believe that there is going to be a lot of volatility going forward. In this volatility, you obviously need to be overweight cash, especially when the opportunity cost is pretty high. So, we would continue to keep cash on the side for deployment at lower levels. However, in terms of defensives, we have got certain stocks in sectors where we continue to deploy money, FMCG, pharmaceuticals and select few stocks. In the banking sector, we continue to like ICICI at these levels. Given the recent performance we believe that even though there may be price destruction, it will outperform the broader indices. Now things like that will continue to go in wherever we remain overweight cash. Otherwise, we will continue to keep cash on the sidelines for a deployment at future levels, which we believe could be lower.