Nifty may settle at 2700-3300: Collins Stewart

Deepak Chhabria, Collins Stewart Singapore Private Limited feels markets will see a higher bottom and may see a rally early next year. "Markets are near its bottom and are trading around nine-times forward earnings. Nifty is likely to settle in a trading range between 2700-3300." He said market was looking for a reason to sell Reliance stock and may not fall any further." Investors are waiting on sidelines and volatility has to reduce first. Lower volatility will attract fresh money flows into the market."



He believes that both PSU and private banks look good after recent moves by the RBI. Interest rates are headed lower and the sector will benefit from this, he added.



Here is a verbatim transcript of the exclusive interview with Deepak Chhabria on CNBC-TV18. Also watch the accompanying video.



Q: How do you read today’s pullback in India? Do you see substantial downside in this reversal?



A: The pullback that we saw today was expected. The event of the US elections was what everybody was looking forward to and the result that we got was faster than most people expected. So, world markets corrected on the news, and in India particularly, we saw some sectors seeing a lot of aggressive selling based on the underlying problems that continue.



The way forward, I think we are probably going to settle down in a range. We have definitely done the price correction that we need to do because at 2,250 or thereabouts we corrected 75% of the upmove in the last four years that the Indian markets have seen.



That statistically and historically has been a very important point where most bear markets have made a bottom. With that, I think over the next few weeks, we will settle in a range with definitely a higher bottom.



Sectors where things are coming out of the woods whether it is banking where we are getting a lot of positive news, or whether it is construction where business is not under threat. As global governments’ efforts moves towards cleaning up the mess that we are in, we would see the stage set for the next rally some time early next year.



Q: There seems to be a building consensus that with that last fortnight of October, the markets sort of turned the corner. If you are playing for a range now, how wide apart would you put the two poles – for the high and the low for the market?



A: Besides statistically, if you look at it fundamentally, in the worst kind of projections, markets went down to about nine-times forward earnings depending on what everybody’s earnings projections are.



I think we will make a band slightly above that whether it is 2,700 to 3,400. Would we make a 1000-point band? Calling the numbers today is extremely difficult. But I think, there lies about the bulk of the range that we would settle in before we actually get a chance to move up again.

Q: You mentioned banking as a space that you are watching carefully now. What do you like over there between the PSU and the private pack?



A: While it was earlier the public sector banks, with the recent changes and the noise that we have heard from the Finance Minister – I would think both private and public sector banks are set for much better performance over the next few quarters. In a falling interest rates scenario, they will stand to gain. The way ahead for interest rates is definitely down and this sector will gain the maximum out of the fall in interest rates.



Q: The stock which got hammered today was Reliance. Where do you see that one headed from here fundamentally and technically?



A: What we really got was repetitive news, which was already there in the quarterly results flashed over the press today and markets were definitely in a mood and were looking for some thing to sell. Reliance bore the burnt of that. What we saw in the press today on the plant closure or various other topics is not new news from the quarterly results. The rally has been most aggressive in Reliance simply because it is an index heavyweight and it is only correcting in-line with fundamentals. So, today’s was one-off correction. I don’t see a significant repeat of that. From here onwards it should at best perform in-line with the market.



Q: What are you hearing about money interest is it coming back to markets or is it too early to call that?



A: The money is sitting on the sidelines and ready to come in and we saw some semblance of that when we had a couple of days of smaller moves in the last week. But honestly volatility has come down before people can put thinking caps or decide what they should buy, simply because the action is going more in individual sectors or stocks and the interest will definitely come in back into some of the key sectors and stocks and there is where the action will be. So, as volatility comes off a bit over the next few weeks, hopefully we get smaller moves and you will see money coming in slowly and steadily here into this market.

Source: news.moneycontrol.com