At best, market can see 56005800 on upside: Sampriti Cap

Sandeep J Shah, CEO of Sampriti Capital in an interview with CNBC-TV18 gave his readings and outlook for the market.

Below is the verbatim transcript of his interview with Mitali Mukherjee and Udayan Mukherjee of CNBC-TV18. Also watch the accompanying video.

Q: Its been a bit bumpy the last few days and global markets are also looking a bit turbulent. Whats your expectation for the next few weeks?

A: The last few times I have been cautioning about the concern about the risk trade coming off. Especially, with QE2 about to end and an environment where commodities, equities and most risk assets selloff. In some sense we have been seeing that happen.

But of course its also been combined with an environment where we are now discussing a second bailout for Greece and a second bailout for a host of other countries also in Euro land. On the other hand in the US there is a lot of economic data which goes back and forth on a monthly or even on quarterly basis.

There is an interesting indicator called the business expectation index. This measures how economic data has been shaping up vis--vis expectations. That has hit a low since that we havent seen since January 09.

So that gives you some sense of the environment we are in with China slowing down. India is perhaps slowing down faster than China is but thats the kind of landscape that we are in.

In this landscape, if you look back and take a look what has happened locally, in this quarter Sensex earnings have been pretty much flat, we have seen no growth in Sensex earnings. We have had disappointments whether its been Infosys, SBI so on so forth; we have seen margin pressures across the board.

What is been even more interesting is that commodity companies that arent fully integrated now such as Tata Steel and Hindalco have also shown decline in profits. So, in this environment the best case for the market is 5,600 to 5,800 on the upside.

I would note that on Friday we touched 5,605 and sharply corrected from those levels. Thats the best case for the upside.

Q: What about the downside risk then? What is the potential downside risk given the global concerns you alluded to?

A: Immediately, there is fairly strong risk that we get back to 5,000 to 5,200. Whether thats the final bottom or not is something that we will have to evaluate when we get there. I have been saying for sometime that you cannot rule out a possibility below 5,000.

There was also a hope that post the assembly elections with the government looking at disinvesting Scooters India. Of course Scooters India isnt a relevant company of any significance. But, it was the first time that the government was doing a bit more than just selling 5% stake in a company and actually looking at disinvestment.

There are lot of roadblocks already as we have experienced. There was a hope that the government would spruce up its act and be a little bit more emboldened. It is going to be a far shakier government with all the protests that are happening. The government is not being able to handle these situations in a fairly mature fashion.

Also Read: QE3 to saddle emerging mkts with more inflation: Macquarie

Q: What does that mean for your outlook on the oil sector?

A: The refineries are best avoided. They are only for people who can actually do some quick trade or for people who have 10-15 year investment horizon. Within 10-15 years we cannot have the same oil pricing mechanism or lack of it that we have and that companies will actually have some freedom.

As far as the oil refinery companies are concerned or even ONGC is concerned there is nothing to think about. Cairn would have been an interesting candidate from a longer haul.

But, in the short-term crude has been coming off and that would perhaps put some pressures in the shorter-term for Cairn. But, from a long-term perspective if you see the kind of volume growth that's happening and their cost of production, Cairn is a fairly interesting stock but, I guess you will have to time it right.

Q: So as an investor what would you do now? Would you deploy any money into midcaps or largecaps at 5,500 Nifty levels or would you wait it out and only deploy money close to the levels that you spoke about, 5,000-5,200?

A: Not looking to deploy money. At closer to 5,600 you could perhaps selectively raise some cash but, this is not to suggest that midcaps are expensive by any standards. A lot of small and midcaps are fairly cheap.

For people who have that kind of investment horizon and can live through a lot of pain, if they bought stocks here, I am sure that over the next two-three years they will see significant returns.

But, for people who do monitor their portfolios a lot more closely and are worried about mark to market losses this isn't the time to be buying. I dont think the earnings downgrade cycle is over yet. A lot of brokers are in the process of downgrading earnings or about to do so. So, you do want to wait and see that cycle complete before you start buying.