Deven Choksey, MD, KR Choksey Shares and Securities, spoke to Krishna Merchant on the markets.

 
The Nifty finally broke past the 5500-mark to scale 30-month highs? Do you expect the markets to move up ahead, or are they due for a correction?
 
I do see markets gradually going up to scale new highs as we progress during this year. The Nifty is trading in 100 points range of 5562-5455, and is not expected to go out of this tight range in a hurry.

The secular bull or bear trend is not expected due to uncertain global environment. The Foreign Institutional Investors (FIIs) have been pumping in money in new funds, but selectively.
 
What are preferred bets (in terms of sectors) if markets were to trend higher?
 
I like Tata Motors, ICICI Bank and BHEL among the frontline stocks. There are plenty of mid-cap stocks that are showing good traction for growth.
 
I am seeing higher amount of growth traction for ICICI Bank and Tata Motors, as they are available at a valuation that is comparatively cheap, and there is a possibility for further upside. I am also positive on BHEL and L&T on the back of growth in the capital goods segment.
 
The volatility Index has been languishing near all time lows. Do you expect a trend reversal soon?
 
I do not expect a trend reversal soon, as the markets are not going to see a secular upside since every stock is not going to participate.
 
It is more of a matured market. Since volatility is unlikely to rise in the short span of time, larger part of sell-off may not happen in the market till some negative news flow happens.
 
MSCI Asia Pacific Index ex Japan has risen 70% since March 2009 now. However, growth in Europe, US and Japan continues to lag. Is the threat of W shaped recovery behind us?
 
The growth is shifting to Asia, particularly China and India, because of uncertainties in Europe, US and Japan. In China and India growth is driven by the internal consumption story.
 
Growth traction will continue in India on back of large infrastructure led spending, which is materializing into higher consumption pattern. This is a nice formula that many economies would like to have. Therefore we expect selective upside in the markets to continue.
 
Do you see global economic confidence re-storing with sudden burst in M&A, which touched the highest level since 2009?
 
High amount of M&A activity is bound to happen because American &and Asian corporates are sitting on huge reserves of cash. American corporates have cash reserves worth $20 million. This kind of money cannot sit in a bank account for a longer period of time. Hence, I expect to see M&A activity in selective pockets of the world.
 
A good example is the Cairn India – Vedanta Resources Plc deal. Vedanta group is holding significant balance sheet, when they saw opportunity in Cairn, they decided to grab it.
 
Because there is growth, consumption and possibility of further infra demand coming into India, people are looking at investing money in these selective pockets where valuations are not very expensive.
 
What is your call on oil and gas sector?
 
Markets have caught a fancy for PSU OMCs. It appears to be more of exuberance under rerating theory and less out of conviction.
 
I don’t think the government will completely de-regulate the diesel prices, because time and gain government has been reluctant in taking a concrete decision. The government will monitor the situation and intervene in between.
 
Lastly, what is your outlook on RIL?
 
When Reliance Industries performs, market will touch new highs. We expect the stock to outperform when gas output increases to 80 mmscmd.