Record high unlikely just yet; see 'mini bubble' in PSBs: JM Fin

He feels the recovery in the information technology space looks genuine and the sector could outperform over the next few weeks. Similarly, metals and autos have been on his buy list for long time and he continues to stay positive. Investors should stay put in metals, he says. Below is the verbatim transcript of Gautam Shah's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.Anuj: When we spoke last, you said the market is not looking topish and it would surprise on the upside. We have seen 8,900 now, not too many people would have thought it would have come at this pace. What is next? Do you see all time high soon?A: The market is at a major inflection point right now and this has the potential to make or break the trend that is currently in place and I say this because we have seen a phenomenal 1,000 point run up on the Nifty in the last eight weeks and as the Nifty has moved higher, it has taken out one level after another and you might get the belief that this is going to go on for a good, but as a technician when we look for evidence on the charts, around 8,900 number, there is a wall of resistance and we believe that around this number plus-minus 50 points is where the market could potentially make a short-term top. If it happens, it would be normal. It would be healthy because we have already run up without any significant correction and whatever corrections that we have seen in the last eight weeks, have been very shallow, in fact they have been time based and whatever price corrections that you had has not lasted beyond a couple of trading sessions. So for the first time in about eight weeks, we are little circumspect at these levels. We feel that the market could potentially make a top around 8,900 mark and if it does happen on expected lines then you could see a minimum retracement down to about 8,650 and potentially even down to levels of 8,450-8,500.If that happens, it will help the market build a higher base because over the last six-eight months the level of 8,000 has been a very strong base and the market has rebounded from there a number of times and by correcting down to 8,500, you will have a much higher base around 8,500 and that would set the ball rolling for a move towards lifetime highs. So right now we would be cautious. In case the Nifty were to cross 8,950 on a closing basis then we will review our stance and start talking about lifetime highs but that is not our preferred working view right now.Latha: When you speak about a level correction, can you also add a time element to it. Later on in the year, how quickly does the market rebound back and what are the highs. Do we comfortably cross 9,100 - the prevailing all time highs?

A: If you look at the last couple of years, there have been two major attempts in getting pass this 9,000 mark and both the times the market made a major top. This happened in '15, this happened in '16 and this is probably the third attempt the market is making at 9,000 but after having run up 1,000 points to expect the Nifty to confirm a running breakout and continue to move higher, looks a little difficult because when you look at the world around us, the US market seem to be in a blowout kind of a phase, at some point of time the Trump factor will come into play, state election results are expected in a couple of weeks, the market is going into those election results, slightly complacent and India VIX at 14 explains that. So yes, you are eventually going to make lifetime highs but are you going to do that in the current run - that is my doubt.

However, if you speak to market participants, you get the feel that just about everybody is looking to suddenly participate in the market and this is not how breakouts take place. So that's the reason we would be cautious here.Sonia: What about the Bank Nifty because there has been a breakout in some of these banking stocks and not too many people expected. Is there further upside here and any specific pockets that you are looking at like the midcap private sector banks?

A: If you look at the Bank Nifty, it has gone up about 20 percent in the last six-eight weeks. In December it was trading at 17,500. It is not behaving like a largecap heavyweight index. It's actually behaving like a midcap stock and now having run up to such levels, it is just getting a little volatile and we were working with about 20,500 as a target for this run and the HDFC Bank factor last Friday extended that move to about 21,000 but I strongly believe that there has to be a sizeable retracement of 500-1,000 points on the downside before the Bank Nifty can take out 21,000.

Yes, there are much higher targets that we are working with from 2017 perspective. At the end of the year you could easily see the Bank Nifty get closer to 23,000 but before seeing those moves, a retracement down to 19,500 is likely and while the public sector undertaking (PSU) bank stocks have seen a substantial move up and they are likely to continue to do well whole of 2017, just for the near term there seems to be a sort of a mini bubble in the PSU banking space. So, one needs to be careful with the index and some of the stocks having run up so much.

Anuj: What about IT. We saw the IT index bounce back from 52 week lows maybe technically make a double bottom. How will you read into charts here and looking at the charts of largecap IT names like Infosys and Tata Consultancy Services (TCS)?

A: The last few times when you asked me the same question, my view was negative. We maintained all along that IT should remain an underperformer but this time my view is completely different because what has happened in the last one week is that the IT index has moved with the market and led this market to levels of 8,900.

I believe this recovery looks genuine and there are chances that the IT index could outperform in the next four-six weeks moving to a level of about 11,200 to 11,500. It is little surprising that suddenly a lot of activity in the defensives; so look at the IT space, look at the pharma space, they have suddenly made a comeback. It is almost as if the stronger hands want to get into this space as the market gets into corrective mode. So probably for the first time in about eight months we would be looking at IT and pharma with a slightly positive mindset.

Latha: What about private banks. Many of them don't make it to the Nifty Bank, the kind of smaller private banks, the RBLs and DCBs and at the same time the Nifty Bank has a large private bank presence. How would you look at that space?

A: It is a difficult call because when you look at the overall market and when you look at specific charts, you get a slightly diverging view because when I look at charts from a weekly or from a monthly perspective; I still feel that a lot of these private banks have more upside but when you look at the Bank Nifty charts, you get the belief that yes, there should be a decline. So at the end of it, it is all about risk reward. Do you want to buy at a Bank Nifty of 21,000 or do you want to buy at a Bank Nifty at 19,000-19,500.

However, I would rather wait because it is important to have an exit strategy and buying at current levels, if you were to see a correction, which is my view then you might not get a quick exit. So rather wait and watch. The medium-term, long-term setup for private banks is still positive but short-term is negative. Therefore, I would buy the dips and not chase the move that is happening right now.Sonia: The space that everyone is in these days and making money is metals, any short-term trades that you see on the upside further?

A: Metals and autos have been on our buy list for a long time and we remain of that view because this is an underperformance of many years that has been covered with metals' rally. So another 1,000 points on the BSE metal index is what we are likely to see. We have a target of about 14,200, so we should get there. Investors can stay Put; corrections come, corrections go but the overall trend for this sector is likely to remain positive.