'Nifty floor at 6700-7000 level; see 12-14% FY17 earnings push'

Given that the Indian market has corrected so much, this is definitely a relief rally, says Nischal Maheshwari, head — institutional equities at Edelweiss Securities. "We have hit a bottom for now, but I am not sure if markets have made a medium-term bottom," he told CNBC-TV18.

He feels Nifty can find a floor at around 6700-7000 level.

As far as earnings growth is concerned, Maheshwari expects it to be around 12-14 percent in FY17.

He also adds that South East Asia is seeing a lot of redemption pressure, but India is in a much better position, he says.Below is the verbatim transcript of Nischal Maheshwari’s interview with Latha Venkatesh, Reema Tendulkar and Sonia Shenoy on CNBC-TV18.Reema: Today and on Friday we saw that much needed relief rally. I think the big question everyone is asking have we put a near-term bottom in place, does the data give you the confidence or there is more downside in store?A: I think given that the market had corrected so much, this is sort of a relief rally. I am pretty hopeful that for the moment we have hit the bottom. However, have we made the bottom in a medium to long term? I am not very sure about that.Reema: You were just telling me that you have had a long tour of Asia, South East Asia, you have been in conversation with various global investors, what is the mood towards emerging market equities, India in particular, especially with respect to the redemptions that we are seeing?A: If I put in one word, despondent basically. These guys are not very optimistic about what is really happening across South East Asia and especially about China. Everybody seems to be facing some amount of redemption pressure whether it is the emerging markets or the India dedicated funds and the proof we are seeing that continuously there is been selling  happening from the foreign institutional investor (FII) front. So, I think we have got to go a long way as far as the problems of emerging markets are concerned.Reema: You have given us a little bit of a scary prognosis when you say that perhaps in the medium-term we have not put a bottom in place. How deep could the correction be and even time wise?A: India if I look at it on a comparative basis, it is in a much better position and that is why we are seeing that the amount of money which is going out of India is not as steep. However, having said that, I think if the emerging markets all correct, I think India will also be a part of that. So, we have to go back and look at it, how deep it could be basically so we have to look at the earnings. Earnings trajectory for FY17, they are talking about 18-20 percent growth which I don’t believe is going to happen. It should be somewhere closer to the mid teens, 12-14 percent, and on that basis I think 6,700-7,000 should be somewhere close to important. Reema: We have seen some bright pockets in earnings for instance Asian Paints, Reliance Industries, Infosys and Axis Bank in the private sector also positively surprised. You are still not expecting too much from the earnings front? A: Earnings will definitely be positive as a whole. What I am saying is the trajectory of the earnings. So, it will not be the 18-20 percent growth which people are expecting; we will be at best around 12-14 percent is what we are seeing. If we look at the last two years, every year we have started around 18-20 percent and it ended up with 3-4 percent growth. So, this year I still believe that it is going to better than that but your valuations are already standing there. So, that is the question basically which you have to see, what valuations to give to India at the end of the year. Reema: The only support that has come up until now for the markets has been from the domestic institutional investors whether it is from mutual funds or insurance. Are we seeing early signs of the inflows from the domestic institutional investors waning, are they losing their patience? A: We have started seeing some amount of waning happen basically because November the figure used to  be a USD 1billion then in December it was 3,300 crore and in case of again January we have been hearing a lot from market that there has been some redemption in the mutual fund. So, now you have to also look at saying that one year returns are negative, two year returns are also going to become negative in a few months time from here so I think some amount of pressure should be there. However, I am very confident that the SIP which is a pretty chunk, that should keep on coming. Reema: Are the phones still ringing from the high net worth individuals (HNIs) with respect to margin calls which are getting triggered, what is the sense? A: I do not track the HNI market basically. I only look at the institutional equities market but I think this is a good day so I don’t think so the phones will be ringing as far as the HNI market for margin calls are concerned. I am hopeful that they are actually placing some orders in the phones calls. Reema: The biggest standout performances in terms of the earnings season this time around? A: I think Asian Paints has done a wonderful job. They grew almost around 14 percent in terms of volumes and there were some price cuts which happened. However, I think Asian Paints has been a pretty good number. I believe today’s HDFC numbers are going to be good and third one which I like is Reliance Industries. Reliance has also done pretty well. So, these are the three stocks which I would say should be giving you outstanding performance. Reema: You spoke that perhaps in the near-term we have put a bottom in place and considering the ferocity of the fall the rebound could be pretty decent. How much could it take the markets to, just in the near-term, this rebound?A: I think the previous testing of the bottom of 7,500 and in a good time I think you can see maybe market going up to 7,700 also. Reema: There was a lot of hope which is pinned on a stimulus fuelled rally. European Central bank (ECB) did that, Mario Draghi did that last week, should we pin our hopes from Bank of Japan (BoJ) or anything from the Fed in terms of not tightening as aggressively, could that be a stimulus for the market?A: As far as Fed is concerned, the market is now expecting only one more hike if you go back and look at the dots plotting which is there on the market expectations. As far as ECB and BoJ is concerned, I think already there have been talks that the ECB is going to be doing another round of monetary easing. All said and done, I don’t know how much of these monetary easing’s are helping actually, except for inflating the asset prices we have not seen growth coming back; that is what my worry is. Yes, you are just kicking the can down the road rather than anything else.