Nifty may not revisit 6800 levels; Fed, BoJ action key: Pros

However, Jaipuria has a word of caution for investors. He says, India continues to remain vulnerable to emerging markets outflows.

Meanwhile, Dipen Sheth, head-institutional research at HDFC Securities, says the rally is not driven by any changes on the ground, it is all about FII money. He advises investor to look for good bottom-up stories and stay invested and not gamble in the market.

Siddarth Bhamre, head equity derivatives at Angel Broking, too gave his views on the market.Below is the transcript of Dipen Sheth, Jyotivardhan Jaipuria, Siddarth Bhamre and Ashwani Gujral's interview with CNBC-TV18's Sonia Shenoy and Anuj Singhal.Sonia: This rally of almost six percent this week came as a bolt from the blue to anyone and everyone on Dalal Street. What do you think was the genesis of this rally and do you think it is sustainable?Jaipuria: Like Anuj was saying India had underperformed a lot in the run up to the Budget. There was this whole fear about capital gains tax (CGT). So, once that didn't come the Budget seemed like a relief that even if you didn't do anything dramatically positive it didn't do anything negative. So, if you look at like India in the last one month and compare it with other global markets India has still been like the underperformer. Most markets have actually performed better than India in spite of the rally. So, in the last one month because India has been more or less flattish over the month. So, it was just India fell much more than most global markets and so it gave this bounce rally which came through.Anuj: So, is this rally sustainable or do you think this is again one of those pullbacks which we have seen in the global markets in the past as well which gets sold into and we seek lower levels?Jaipuria: Yes, like we have had the rally. So, we have had a jump from the lows we have had close to a 10 percent jump. The next two weeks are going to be the weeks of central bank. Because, you have the European Central Bank (ECB) meeting on the 10th and then you had the Fed meeting on the 15th and that is somewhere we will decide where global markets go and where India goes. So, India is back to global cues from now on till the reserve bank actually acts. So, the next few weeks are going to be more like India performing in line with what the global markets do and the global markets are going to be determined by what the two central banks do.Sonia: I am sure you do a lot of ground level checks on earnings recovery, sentiment indicators etc. Fundamentally do you think anything has improved for this rally to be warranted or do we still have to wait some more time before seeing any sustainable pick up in earnings?Jaipuria: If we look at the economy my view is we are bottoming and we probably see a slow recovery happening which will be more visible towards the end of the year. This will be lead mainly by consumption, so you have urban consumption which probably has been picking up slightly. The rural consumption was disappointing last two years. In some sense it dragged down what was the urban consumption recovery. Hopefully we had a good monsoon which by law of probability should be a good one and so we probably see by the end of this year both urban and rural consumption doing well. That probably will lead to a bit of recovery in the economy and that leads to some earnings recovery.Anuj: You did say that this could be the trend weak. Do you think the market could go through a process where there is still a lot of scepticism, a lot of people miss out calling it a circus rally while the market keeps moving up?Gujral: Chances are that next week we will see some amount of consolidation. But obviously everybody wants the market to come down to 7150 which it won't. But the next week cannot be the kind of trend we have just seen. 85-90 percent the bottom has been made. Now once we consolidate a bit and again move forward that will get confirmed but I believe that looking at several different stocks and sectors. It appears that 6800 may not get revisited again. Obviously we can consolidate for the next one or two weeks but overall the trend is up and the market is unlikely to give great opportunities to enter. Maybe a 100 or 50 points here and there corrections you will get but overall just the under ownership will not let the market correct beyond a point.Sonia: That is about the bottom, what about the top, because give and take everything, all this market has done is just reversed its losses that it saw in the month of February. At the start of February, we were at the 7,500 mark, so do you get a sense that the upside for this market is also capped at around this 7,500-7,600 in the near-term or could we take that out in the next couple of weeks?Gujral: Obviously, from 6,800, you will not go straight to 9,000. There will be backing and filling, but the process of rebuilding has started which means, we were coming down the stairs, now at least, we will at least go up the stairs a bit. I believe by end of the year, if some amount of good news starts to happen, 8,200 is not so unlikely. But from 7,550-7,600, thereabouts, you will have some consolidation, some correction, maybe fresh rally resumes from about 7,350-7,400 and then we go back towards 7,950 type of zones, all that is possible and that will take its own time, but I believe that incremental downside that we were seeing, lower bottom, lower highs, that has been turned to higher bottoms and higher highs.Anuj: The other key factor this week was, we had the return of FII inflows. Would it be too early to celebrate that or do you think we can say with fair degree of certainty that the worst of outflows at least could be behind us?Jaipuria: It is probably a little too early to celebrate because what we saw was, there has been a lot of fund flow out of emerging markets and India was just part of it, because India was the most overweight country still for emerging market funds. So, if we get a renewal again of emerging market money flowing out, then we will probably get this FII flow again coming to haunt us – okay, emerging markets are seeing outflows and India is seeing outflows. What we have not done and that is something which has been missing is India is just standing out on its own that even if you are getting emerging market outflows, our earnings are so strong, our economy is so strong that you cannot sell India. That phase we have not yet seen in India. So, we are still very vulnerable to what overall emerging market outflows are.Sonia: We had some big moves in the PSU banks and the metal names last week. If you had to pin-point about three or four stocks that one can buy into next week, what would your list look like?Gujral: Since this is a weekly show, I have looked at some monthly charts. So, what we have to do next week, I will be able to talk about Tuesday morning. Let us look at, since we are talking about bottoms, what the longer term person could buy in terms of mean reversion. Basically, what I did was I looked at the monthly chart and I drew a 20-month moving average. Now a lot of stocks have not initiated their monthly trends. So, something like UPL in spite of correcting from Rs 570, it is still holding on to that average. So, that is something longer term people could buy and look for a retest of Rs 550-570 given agriculture focus etc. That could work out well.Similarly with SRF, again, you have seen a correction towards its 20-month moving average. Out there, you could easily see targets of about Rs 1,450. Similarly, the banks, SBI, ICICI. What has happened here is that they have moved below the 20-month moving average by quite a margin. SBI, it has been for the last three odd months below that average. So, Rs 140-150 is a strong support. Even just getting back to the average which is what mean reversion is, you should expect Rs 240-250 on SBI.Similarly, ICICI had 20-month moving averages closer to Rs 290. So, significant moves can happen just by virtue of the stocks getting back to equilibrium, no great rallies, no fresh highs, so the stocks are very oversold. Similarly, something like Hexaware, again, strong monthly uptrend, just about corrected, and easily it could get back towards levels of Rs 320.Anuj: What do you make of the return of FII inflows and what do you make of the big rally that we had in PSU banks all through last week?Sheth: Second part is very easy to answer, it has been more of Siddharth Bhamre's week than my week. It is the F&O guys who have been freaking out here and entirely driven by nothing that has changed on the ground but the FII money which has come in. So, both the questions are interlinked.It is not just the PSU banks which have shot up, there are a whole lot of other stocks which have also moved. We have seen this earlier, we have seen this for a number of years in the Indian markets that once FII flows come back and here are the numbers just to get some perspective. Ex today, we will get the numbers for today in a bit but in the last 10 days FII inflows have been Rs 1600 crore. However in the last three days, ex today again, FII inflows have been Rs 4400 crore. So, even the 7 days prior to those three days saw close to Rs 3000 crore of net outflow, so a little bit of coming back of FII money over three days something like Rs 1500 crore on an average and see what it does to the markets, see what it does to the frontlines and that is where much of the money gets allocated.PSU banks were completely beaten down, you have seen large names like Punjab National Bank (PNB), Bank of India (BOI), having cracked 30-50 percent from even three months ago. So, some of that money would have flown in and then obviously all the F&O guys Siddharth Bhamre and his friends would have pounced on the opportunity and started running up huge positions on futures.So, it makes complete sense if you ask me really.Sonia: For retail investors what is the advise now because it is very confusing. First part of the year we have seen a big fall. Now the markets have suddenly gone up, Sensex is up 1600 points in three days, what is the advise?Sheth: The thing is that you need to find good bottom-up stories and stay invested. Do not try to gamble in the markets. Don't try to fish for things just because they have fallen. Buy good solid companies and stay invested and hold on to your stocks.If you have actually backed this buying with some diligent research or some fact finding or some good advice, then if stocks fall then you should be averaging on the way down.Stocks will fall and they will rise because that is what the stock market is all about. It is a volatile asset class. Every time FII money gets out you will see a crack in the markets and you will say I made a mistake but you haven’t at least if you are in the right stocks.Anuj: I remember at the start of the series you were quite bullish on this market but what now? Do you think that the first part which a lot of people say the easy part is done or do you think we will still have much more rally from hereon purely backed by incremental short covering?Bhamre: I would first like to give you some backdrop that why we were not negative for beginning of March series because after the rumour came out in market that government may increase long term capital gains or introduce long term capital gains tax we were seeing some stability around 7200. From 7200 to fall near to 6800, we haven’t seen FII selling, we haven’t seen DII selling and it was more of sentimental selling which was happening and we did mention about the word sentimental selling then.Similarly the bounce back which has happened till 7200 was again sentimental buying and then short covering has started.On the Budget day bank Nifty which we are talking about that how lot of short covering is happening over there and indeed it is happening but Budget day and next day we had seen formation of long positions in bank Nifty and the other stocks. It is last 2-3 trading sessions including today's where we are seeing short covering and there is some more short covering which is left.Answer to what next? I feel we are talking about how FII liquidity is coming back but we need to break up that liquidity that where exactly this liquidity is coming. You spoke about cash market and the impact of that buying on markets but more than Rs 9000 crore of buying has been done in index options in last three trading sessions. After October 28 2015 put call ratio has gone above 1 levels otherwise in last four series out call ratio was trading below 1, around 0.8 or so levels. Why that has happened? Because FIIs have bought huge amount of put options, more than probably 2-3 times of what they bought in cash market or index futures. This should not be taken lightly. I am not saying markets are going correct immediately, things have not changed, we have got a bounce, we are not into bull market again. It can be a volatile market, we have seen that the implied volatility of call has reduced but put has not reduced that much.So, I will take some profits on the table right now, I am not shorting but I will be open to ideas of shorting as well in this market, not index but probably stock specific.Sonia: I was going through the note that you have put out and you do say that select stocks have fallen terribly from their peaks and offer good bargains and you have added Maruti into that list. Apart from Maruti, which are the other stocks that are offering good bargains now?Sheth: If you look at the largecaps and just if I can tie in with what Siddarth was saying that his tribe looks at things on a month-on-month basis or maybe even an expiry to expiry basis and I perfectly respect that. It is just that we are in a different business. You have to take a one year or a two year call, so I am not so worried about whether we are going to go from 7,000 to 7,500. At 7,500, my worry is going to be, are we in any danger of falling to 6,500 or is there more opportunity to go to maybe 9,000. And I will obviously give myself a year or two for that eventuality to play out.So, I do not think my thesis has changed materially from 8,000 down to 7,000 and back to 7,500. We are in a long-term structural mint. Now hold that thought for a minute and we will come back to what you said.So, on the largecaps, the obvious guys to buy, unless there is a structural change in the business, are the guys who have fallen for no discernible reason. And, you can always invent and discover reasons why something should have fallen in retrospect. But largely the structural story seems to be intact. So, there was a big challenge which played out in the case of Tata Motors because of global demand apparently, which was going to crack. And by the way, that fear is not proved to be well-founded, if you look at their latest US sales, for example. And, if you just look a year-on-year numbers for Tata Motors and you will see that this is a company which has consistently grown every year in numbers after the global financial crisis.For Maruti, the structural story is very much intact and now, even with the rural flip that has come into the Budget, and with the Seventh Pay Commission, these are old arguments, I am not saying anything new about Maruti. There is going to be 20-25 percent earnings compounding over the next two years and it is down. And our target price is close to about Rs 4,786 on this one.And, if you look at the huge amount of depreciation that they book, and if you add that back to earnings and look at cash earnings, it is probably available for 10x or something on FY18 basis. And I do not think there is a substantial risk to earnings there until and unless there is war or something.Anuj: What about trading ideas? At the end of the day, we have the traders who still make the lion’s share of overall turnover, so from that perspective, what are the stocks that you look at either shorting or going long?Bhamre: I have a blend of both and just one more point that liquidity parameters like gold, even in this global rally, has not corrected and gold is inching up. So, we can take cues from there also that we should not go ga-ga over this bounce back and this is not that it is taking us to 8,000 plus levels immediately. So, there is some worry still in the global situation.Coming back to stocks, Infosys has shown decent bounce back from Rs 1,100 levels to Rs 1,170-1,175, it is trading. We have not seen any formation of long positions. It is merely short covering. If you look at multi-month charts, between Rs 1,180 and Rs 1,210-1,220, this 30-40 point zone, it has very strong resistance and I am anticipating fresh formation of short positions in Infosys at this point of time. I do not have very aggressive downside targets, but I am expecting Rs 70-80 fall. For a positional trader, it is quite some in a largecap stock. Rs 1,108 is my target and Rs 1,204 is the stop loss which I am suggesting to maintain for this short trade.