FIIs upbeat on India; Nifty to hit 6800-6900 by yr-end: BNP

Also Read: Emerging markets now offer 'fantastic value'

Below is the verbatim transcript of Manishi Raychaudhuri’s interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy. For the complete interview watch the accompanying video

Latha: We seem to have gone through the blushes of 5,950 with some ease. How do things look from hereon? Do you think that now the markets are better placed to challenge 6,400? Will that definitely be taken before the elections?

A: In general, till the election time, the market will continue to move sideways with possibly a small upward bias. Even the broader macroeconomic scenario has improved. We know about the current account deficit (CAD) and trade deficit that has a rub-off effect on broader gross domestic product (GDP) growth as well.

There have been some signs of earnings estimates improving as well. If you look at last three-four months, there have been two quarters of positive earnings surprise in the Indian context and in general, the earnings per share (EPS) estimates for 2014 have possibly moved up about 2-3 percent. That is a small number at this stage, but it comes almost about 15-18 months of downgrades and that inflection point should not be ignored at this point of time. To a significant extent, this recent rally or the outperformance of India that we have seen that is driven by the political hopes that you talked about. But at the same time, there has been some improvement in the fundamentals as well.

Latha: What is this EPS number you are looking at for 2014 and where has it moved up from likewise 2015?

A: Yes. For fiscal 2014, we are somewhere close to about Rs 1,250 or so and therefore for fiscal 2015 we are talking about close to 15 percent upside from here. Both these numbers have moved up somewhere around 2-3 percent in the course of last three months. But possibly the impact is bigger on fiscal 2015 numbers.

Sonia: You said the earnings estimates are picking up in certain sectors. Which are the sectors where you are expecting to see either upgrades or a troughing out of or bottoming out of earnings?

A: As of now, the biggest upgrades have come in the exporters. IT services have been the biggest contributor followed by pharmaceuticals and selective merchandise exporters for example, within the auto space we have seen significant upgrades in Tata Motors and there are a few other smaller pockets where also we have seen some upgrades. Even though that comes after almost about 15-18 months of downgrades and one such example could be the private sector banking universe, which gave a mild positive surprise during the last quarter.

Not so much to public sector undertaking (PSU) bank which was a big disappointment in the last quarter. So there is a clear case of divergence here. We think that even oil and gas particularly the oil marketing companies (OMCs) have also seen some upgrades because the subsidy number or under-recoveries declined in fiscal 2014 compared to fiscal 2013 and we think that the trend may continue in the next year as well.