'Sensex to consolidate between 13,000-20,000'

Anup Maheshwari, Head Equities & Corporate Strategy, DSP BlackRock Investment Managers talks with Puneet Wadhwa on the road ahead for the markets, likely stimulus withdrawal and the Union Budget.

With spiralling inflation and indications of stimulus withdrawal, how do you expect the markets to pan out in 2010?

One concern for the market would be on interest rates. While inflation is clearly an issue, the headline numbers are being accentuated by the base effect. We expect inflation to rise till May 2010. From June onwards, the reverse base effect will start to kick in and inflation is likely to trend lower. Moreover, the current inflation is being driven by supply-side issues. The government too is concerned about this, but only longer term measures will address this problem.

We expect the stimulus withdrawal to be in phases. The government would also need to monitor the progress of the monsoons this year and accordingly adjust the pace of the stimulus withdrawal.

The equity market valuations should not be affected meaningfully as long as the 10-year benchmark rate doesn't move up significantly. After a V-shaped movement in markets over the past two years, we expect a large range-bound consolidation this year. We expect the Sensex to spend the bulk of its time between 13,000 – 20,000 levels in 2010.

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