Mkt to stay volatile; focus on RBI Guv's statement: Bhat

Dilip Bhat, Joint MD, Prabhudas Liladher feels that Nifty could be in 6200-6300 range and that could be the best and expects market to be volatile within a 300-400 point range.

Although liquidity has been the main factor to propel Nifty closer to all time highs, there are several other factors like corporate earnings growth, fundamental support from the economy, friendly international environment etc which are weighing heavily against it, adds Bhat. So, even if it crosses the all time high, volatility is sure to increase. On the RBI policy front, he thinks market will focus more on the governor's statements that follow his action. Also read: Mkt rally not to last long; don't plunge into midcaps: BNP Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is your call after the big rally and how would you see the market action over the last couple of days. Is it showing you signs of peaking out or is it showing signs of consolidation before another big upmove? A: It is difficult to answer this question because the market requires a lot of legs to move on. It requires the fundamental support from the economy, requires the corporate Nifty earnings per share (EPS) growth support to provide a good tailwind, a very amiable and friendly international environment, and most importantly liquidity. So, it is very clear that liquidity, which has been providing a good tailwind has taken the market close to its all time high. However, the question is how far can it go and if it goes will it be sustainable. My sense is even if it crosses all time high, the volatility will only increase because all other factors seem to weigh very heavily against the market. Now with the possibility of hike in repo rate or even if the rate is maintained, markets will probably look for some more breather. Having said that I still feel that market will move in a very volatile way within a range of 300-400 points on the Nifty. So, even if crosses, it will become all the more vulnerable for the downside. So, the best case scenario would be around 6,200 to 6,300. Q: There is Reserve Bank of India (RBI) policy next week and a possibility that the repo might be hiked by 25 bps. Do you think that the market has already factored that in? A: My guess is that it maybe raised so one should not be surprised looking at consumer price index (CPI). My broader analysis is that for RBI, for the foreign institutional investors (FIIs), fund managers or for bankers abroad inflation still remains the dirtiest word. So, probably RBI will do whatever it takes to control the inflation. Even according to conventional thinking if inflation has to rein in then these are some of the measures which one needs to resort to. It doesn’t matter whether it is just food inflation or whatever because it is contagious by nature. That is what makes me feel that he probably may raise or at best may leave it as it is. However, if one were to think a little out of box then probably RBI could lower rates and set in a mood of optimism. Therefore, I would still vote for something like maintaining current rates but wouldn’t be surprised if it is increased. So, market has not factored that kind of a thing but what is going to of more importance is his statement that follows his action. That is what will be closely viewed by the market.