In an interview to CNBC-TV18, Girish Pai, director, Claritas Research shared his reading and outlook on the market. According to him, the Nifty is set for a 700-1,000 points pullback until the elections happen. “Where will it (the fall) stop one really does not know, but wherever it stops, I see a pullback at least till May of 2014. This pullback in the offing could be pretty serious,” he added.
On sectors, one can buy banking stocks from a three-four months perspective, but those looking to serious bet on PSU banks should wait of elections to play out. He recommends betting on export-oriented sectors like IT and pharma.
On the flipside, he suggests staying away from metal stocks as of now.
Why JM Fin, Macquarie differ on Nifty's next move
Below is the verbatim transcript of Girish Pai's interview with Anuj Singhal and Latha Venkatesh of CNBC-TV18. For the complete interview watch the accompanying video.
Q: What is your call on the market right now looking at the global setup and the kind of domestic internals that we have. Is this a fall that you will actually use to buy?
A: Yes, I would use this fall to buy, but at which point is the question. Will it fall further; one needs to look at that. In the last three-four years we have seen such falls happen. There have been events including a crisis in peripheral Europe, Greece, Cyprus and we have seen taper talk related selloff in 2013. There have been numerous events which have led to serious corrections in the market, but in this correction, the market is just about 7 percent off from the peak, it is not even a garden variety correction in my opinion. If you look back in history between 2003 and 2007 through that very large bull market that one saw, corrections could be as deep as 20 and 30 percent. It is not even a garden variety correction. Where will it stop one really does not know, but wherever it stops I see a pullback at least till May of 2014 until the elections happen.
There is a pullback in the offing which could be pretty serious. We could see a 700-1000 point pullback on the Nifty because most of the other things are in place. Incrementally from a domestic standpoint, there seems to be some amount of comparative populism developing in various states and even at the centre, which is a negative. The positive is that RBI has been fairly active in terms of controlling inflation. The rupee has been fairly strong in one sense. I do not think macro data has been that negative and earnings season has been okay thus far.
Q: Are you seeing a turn in the earnings season? Are you seeing the worst over and incremental climb?
A: Not really. The data points are far too few to take that call. If you look at the current earnings season for whatever data that has come out, except for the tech sector where there have been some mild surprises the rest of the companies have just about met expectations. On the banking side, they have been a little negative from a performance vis-à-vis expectations standpoint, especially the PSU banks for instance.
I do not think this particular earnings season is giving any specific cues, but if the market has to rise up pretty dramatically from here and move away from this bipolar nature that we have had in last couple of years, we need to see investments pick up, we need to see dramatic action from the government's side. We need to not only have a stable government, but a government which is going to execute pretty well whatever bold plans it has got.
It could mean a pretty bad FY15 if you do have a situation where petrol product prices are increased dramatically to reduce fiscal deficit you could see some of the surplus inflation come to the fore. So some unpopular measures will have to be taken by the next government to actually set this country back on track to a high growth path somewhere in the next three-four years.
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