Tepid results from across sectors have kept the market in a range, shooing foreign investors from putting in money here. And the scene is unlikely to change anytime soon.
In an interview on CNBC-TV18, Devesh Kumar, head of equities at RBS India said the market would be in shock from the results for the next two weeks. "The uptrend could resume only post September, when inflation lowers and valuations get attractive," he added. Talking on rising inflation, which has been a major concern for the market over the past many weeks, Kumar said, "It is likely to ease out from August." Also read: Mkt to fall by Friday, but it's still buy on dips for HDFC Sec Below is the transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying videos. Q: Do you see more range-bound trade or do you see downsides opening up post earnings? A: I think this earning season expectation was low, but still some shocks are coming. For the next one more quarter, next three months, market will remain range-bound. The markets are working on two things. One, anticipation and second is announcement of it. So, currently announced effect is keeping sentiments negative. But at the same time, if you look at anticipation, anticipations are interest rate cycle is peaking out. Therefore, hereon after 25 bps rate hike the cycle is going to turn the other way. Inflation, August onwards, we will start seeing inflation easing out. Next three-four months are going to be tough for interest rate sensitives. Bt I think demand built up and margin construction activity will begin in the second half of this year. I think people in anticipation will come to market. Ty will buy the market because ultimately equity market is all about anticipation and your activity is based on that. That is why we feel that for the next 15 days people will react to shocks or the encouragement that they get from the results. If you look at the trend now, in each of the sectors you have a couple of very good performances and bad performances. So, one cannot work based on general principal that buy X or Y sector. I think businesses where your leverage is low, businesses less sensitive to interest rates and management is working on getting through this tough environment in a better way are likely to do well for the next three months. But after that, general environment is going to improve and there will be interest in markets. Q: Is it likely though that the market sees one more sharp cut, somewhere close to the lows of the year which is really that price point that people want to get in and buy at or do you think that is unlikely whatever happens will happen within the current range? A: We feel the valuations are probably not very cheap. But at the same time, they are attractive. In a market today, there is no firm view on one side or the other. Bulls and bears they are evenly poised. One good news or one week with no negative newsflow results in reasonable buying in the market and one or two shocks also results in hammering. We feel that, at this point of time, any correction or any reaction will bring in buyers. Therefore, we do not see any big pressure on the market. We feel that this accumulation phase in the market will continue for a bit longer. Then after that, market will start showing signs of recovery. Q: Do you expect the broader market to experience more earnings pain over the next ten days? A: The pain of demand destruction or impact on margins because of desire to push sales is reflecting now in numbers. So, this may continue for couple of more days and that may affect the market. Having said that, I think we started with low expectations. In couple of cases, we are seeing things being worse than what was expected. In such a situation, when the positive factors start reversing then reversal is also very sharp. So, in a couple of companies, there the feeling comes that probably the restoration of profits to last years level will take couple of years. It may not happen because things are not very linear in the market. If the right environment emerges and right strategy is there then the recovery is sharp. I feel that next two weeks will be guided by announcement. Announcement effect will overpower the anticipation. And 50 days later, we will have anticipation again coming back. One is anticipating, at this point of time, positive factors like interest rate, inflation and policy decisions to move in right direction. _PAGEBREAK_ Q: What do you hear about money interest into the market? Someone was pointing out yesterday even the money that we have seen in the last month or so was probably more a function of passive investment into the region, so we got a little bit. What are you hearing about IndiaDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
