Market Voice: Gaurang Shah

'Markets look stretched at 5,400'

Though monsoon and result season are likely to be strong triggers for a market rally, Gaurang Shah, assistant vice-president, Geojit BNP Paribas Financial Services, tells Ujjval Jauhari that markets may fail to attract fresh funds at the 5,400 levels. Excerpts:

What is your investment strategy in the current market conditions?
With a time horizon of more than one year, investors can invest in a phased manner below the 5,100 levels. We are being cautious because of the possibility of more corrections and volatility in the European markets, which may also affect Indian markets. We can see a 300-350 point correction, but Nifty is not likely to go below the 5,000-5,100 levels.

Do you expect markets to move up in the near-to-medium term?
Indian markets can rise to the 5,250-5,300 levels. Results for the first quarter and a good monsoon can push it up further. However, markets look a bit stretched at the 5,400 levels. At these levels, we have seen no fresh funds coming in, neither there has been much liquidity. Markets are pulled by liquidity only.

Do you expect another hike in the upcoming meeting on July 27?
The recent rate hike was in line with expectations. As of now, we do not see any increase in the lending rates. However, at the policy review scheduled in July, any changes in the statutory liquidity ratio and cash reserve ratio may push up lending rates, which will be negative for the markets.

What are your views on the oil and gas stocks? Will you recommend these at current valuations?
We have seen the government deregulating petrol only, with some price hikes in diesel, kerosene and liquified petroleum gas (LPG). Total deregulation has still not happened.

Even though the prime minister has indicated deregulation of diesel in the coming EGoM, how soon that will happen is not known. Also, we do not see further hikes in kerosene and LPG. So, one has to wait and watch. Stocks at these levels seem fairly valued.