Vaibhav Sanghavi, Director – Equities, Ambit Capital, spoke Priya Kansara Pandya on the markets.
 
The markets seem to be facing some resistance to scale up further, besides being rangebound for most part of August? How long would this continue?
 
We have witnessed rangebound movement for Indian equity markets since the beginning of 2010, which has been in line with the trend in global equity markets as well.
 
We think that will continue for couple of months. The economic data coming out from the global economies is making the global markets a bit volatile. We think that the Indian markets are also likely to be volatile in a range in the shorter term. 
 
People are talking about a possibility of a correction. Do you agree?
 
I do not see a reason for the markets to fall too much, and do not expect more than 10% correction if at all because of global factors. Strong domestic factors are giving lot of support to the Indian markets even as global markets are weak.
 
Which sectors, in your opinion, are likely to fall the most in the event of a correction?
 
Since Indian markets are currently driven by global factors, I think commodity companies will be the first to fall. Besides these, I don’t see a major sell-off in any other sector.
 
How do you see the scenario on input costs? Do you further pressure on Operating Profit Margins (OPM)?
 
We do not see a big upside in commodity prices, which mostly includes oil and metals on an overall basis. On the other hand, Indian companies will benefit from higher operating leverage going ahead. Thus, the pressure on OPM is less likely.
 
Do you think oil marketing companies, which are on a roll offlate, deserve further upside and justify the investor interest?
 
The whole space has witnessed lot of interest post government reforms on petrol pricing and they are undergoing a process of re-rating. I think oil marketing companies deserve further upsides as these companies are substantially under-owned and interest on these counters is only rising.
 
What are your sectoral preferences in the current market conditions?
 
We like retail, education, IT and media companies, and are staying away from commodity and telecom.