Market Voice: Harendra Kumar, Head, Elara Capital

'I expect volatility in the market to increase'

Harendra Kumar, head, institutional equities and global research, Elara Capital tells Krishna Merchant that he expects foreign inflows to begin in the second-half of this year

After the Union Budget in February, the volumes on the Bombay Stock Exchange have fallen. Do you feel this rally will be sustained?
Well, I would not read too much into this. I do not think that the upside will be sustained. We have seen some buying in smallcaps, but the largecaps are pretty much flat. I believe that the upside will be capped at 18,600 (sensex level).

Do you feel India will be able to attract foreign institutional inflows in 2011?
I do not see inflows coming in now, but I expect inflows to begin in the second-half of this year, as macro conditions will be better, inflation will be under-control and developed markets would become expensive in terms of valuation at that time.

Do you expect volatility to ease out in the near future?
No, on the contrary, I expect volatility to increase because the markets are probably going to trend downwards.

Is it a good time to buy banking stocks given the correction?
I believe the banks would trade sideways in the medium-term. We are not optimistic on the credit growth.

What is your outlook for the information technology (I-T) space? Any stocks that you would like to recommend in the I-T pack?
The I-T sector is expected to give 10-15 per cent returns for the year, which is reasonable. We like Infosys from a medium-term perspective and HCL Technologies as a long-term bet.

What is your outlook on National Thermal Power Corporation (NTPC) and Steel Authority of India (SAIL)?
We have a slightly neutral-to negative-view on SAIL, because there is no expansion happening. As regards to NTPC, there have been delays in projects and besides issues exist on the coal front.

The delivery-based volumes have fallen 42 per cent from the highs in November to 39 per cent now. Does this decline bother you?
Yes, it is a cause of concern, as it indicates that there is no fresh buying interest in stocks for the markets to go up from current levels.