Nifty likely to see 6500 by May 2014: Dron Capital

Bullish on the Indian equities, Pathik Gandotra, partner, Dron Capital Advisors says the Nifty will see a level of 6500 in May 2014.

Speaking to CNBC-TV18, Gandotra says investors can expect atleast a 10 percent return on their investments as the market will focus on quality stocks for the next six months.
However, on a more imminent market-moving event, Gandotra says the Reserve Bank's monetary policy on Tuesday is likely to be a non-event.
"The view is that there will be a 25 bps hike in the repo rate and 25 bps cut in the MSF. So, it will be a non event. Now the only risk is if the RBI hikes repo rate by 50 bps and does not cut the MSF, then that is the only scenario in which the market will respond to the monetary policy," he adds.

On his favourite stocks right now, Gandotra says he is very bullish on ICICI Bank and IT major Infosys. Below is the edited transcript of Gandotra’s interview to CNBC-TV18. Q: It has been a very strong ride for the markets up until now, infact almost Rs 14000 crore have come in from Foreign Institutional Investors (FIIs) in the last 10-15 days. Do you think this money flow will continue?
A: I do, because our view is that the Federal Reserve will continue on its path of holding back on tapering. So, the tapering is now in my view a June phenomenon.The Fed wants to see data improving before it actually take a view on tapering and data hasn’t improved at all. On top of that, the issue between the governments has also not got resolved. We may possibly have another showdown in February.
And lastly, Janet Yellen has come as the Fed chairman and she is extraordinarily more dovish than even Ben Bernanke. So, my view is that they will push the tapering back.
The view there is that they want to actually see an economic recovery, which is very obvious and visible to everyone before they take a move, they will not preempt anything because so much of money has already gone into QE3 that taking a view just because the debt levels have gone up will be very counter-productive. Then they will have a bigger problem, there will be no growth plus there will be a scale-back, markets will collapse. So, it will be a very counter productive thing to do. Hence, they will continue and they will take the risk. The risk eventually is if things go out of hand then there can be a big collapse across the world but I think they will go for it. Q: What are you factoring in as a base case for tomorrows RBI policy and what have the markets discounted?
A: I think it will be a non-event because the view is that it will be 25 bps hike in the repo rate and 25 bps cut in the MSF. So, it will be a non event. Now the only thing is there is a risk that if the RBI hikes repo rate by 50 bps and does not cut the MSF, then that is the only scenario in which the market will respond to the monetary policy.
Otherwise, it will take it in its stride. Financials are not reacting to repo rates anymore. The crash in financials happened because of what the Fed did, not what the RBI did. What the RBI did has already come back. Raghuram Rajan did a surprising repo rate hike, the prices are almost back to what they were before the hike. So, the market is telling you that that hike did not matter so this hike also won't matter. Q: You said the global environment is positive so what does this take the index to, do we gun for up until 7000?
A: What I think will happen is that the fund flow will be positive, the economy will nudge through and it will actually start showing positive signs sometime later this year or Q1 of next year.
The whole buildup on the election-front for stable government is, and a reformist government will also be taken well by the market. So, the market should rerate. I would expect a 10 percent return on the market from here so something like 6500 by May is what we would expect. I know it is a big number, I know nobody has said that, people are still worried about the near-term. The near-term levels will provide some resistance so it might correct from there but I think this market is clearly going up as long as global liquidity is benign.