Investors still buying good quality stocks: Dimensions

Stock specific he would like to buy Divi's Lab, Lupin, Biocon.

Also read: EM crisis not caused by US Fed taper: Credit Suisse

Below is the verbatim transcript of Ajay Srivastava, CEO, Dimensions Consulting interview with Sonia Shenoy, Latha Venkatesh and Anuj Singhal on CNBC-TV18.

Latha: Is there a possibility that the markets could swing much lower simply because now actual extra incremental money is drying up. After all fewer dollars are going to get printed with each passing day and therefore incremental FII buying stops preventing the market from reaching once again earlier highs or even new highs.

A: Liquidity has hardly gone out of the system. You saw the numbers of last 7-8 days. This whole concept that reform was holding us back is all rubbish, because last year when the government was in a limbo you had highest ever FII inflows.

All the investors are not animals of reforms and all this nonsense. We are all animals of returns when the market is right. So, I do not think investors are going to dump these good quality stocks of India and flee India in mass. Right now the global trend is that the people are booking profits, people are selling off the loss making positions, the ETFs are selling, but if you look at the high quality investor few sales have happened yesterday on delivery based, but by and large do not go and dump the family silver whether it is emerging market or anywhere they are accumulative.

I do not think you will find large scale dumping of Infosys for instance. So it may takeout liquidity from stocks like Jaypee Associates and others such stocks which have got frothy, but will it take out the liquidity out of Infosys, maybe up to Rs 3,200-3,400 but not beyond that. So you maybe right, whether it goes to new high I am not sure, because our view has been that 2014 will end at a level lower than 2013 December. That is our thesis from day one and we still hold onto it, but within that gamut of market there is enough out there to make decent money from.

Anuj: We are in a market where Rs 500-600 crore of FII selling is leading to this big decline. Isn't it a good chance that whatever because of margin calls, stop losses getting triggered, the stocks that you mentioned are available 10-15 percent cheaper over next one month or so, purely because of the technical nature of this market.

A: Of course, not only technical nature, I think there is an exhaustion also, because all of us that piled onto IT in a big way in the last one year, lots of people want to book the profits seeing that the market is uncertain globally, that is one parameter. The second parameter I guess is that margin call could be one of the biggest threats to this market, because people had built up huge positions on midcaps, small caps and all kind of bunch of rubbish in the market including cyclicals and those have hit by 30-40 percent, not by 5-10 percent.

So when you are going to cough up those margins and those cannot be sold notice how many lower circuits are operating yesterday on the midcap and the small cap, so if you cannot sell it, what do you do next? You go to the broker and you will go sell your family silver at the end of the day and make up for margins in the market.

So the story of midcap and small cap remains the same; very deadly stocks cannot be sold and therefore you end up selling the most liquid stocks. So I think if it goes 10 percent more, it is a 100 percent buy, you should not even think twice about it.

For the entire interview watch the accompanying video.