With higher interest rates and inflation there are going to be concerns: Sajiv Dhawan, JV Capital Services

In a chat with ET Now, Sajiv Dhawan, Managing Director, JV Capital Services, talks about the market outlook.

What do you make of the current rally and do you think for the year Indian markets have turned corner and we bottomed out for the year 2011?

The last couple of months have been relatively dull. Yes, everyone is a bit more confident, in a very slight way, over the last couple of weeks because the markets have gone back to that 5700 level but fundamentally as long as we have higher interest rates, high inflation there are going to be concerns. The FIIs have been buying, that obviously had led to some decent rally back in the markets but it is difficult to see why we are going to be above 5700-5800 in the short term unless we have some more positive news either with the results and some more confidence that interest rates are finally peaked out and opinion is very clearly divided.

My opinion is, over the next couple of months we might again see a volatile or relatively dull period. I feel that over the next three to six months as interest rates hopefully start to subside and inflation comes under control, as long as there is no other major disaster in Europe on the debt crisis there, I think we are in for really substantial rally from may be October to December-January time that is when money flows will start to come.

Retail sentiment is unfortunately still very low. They have lost a lot of money in small caps and midcaps. Portfolio investors have held on to blue chips such as Hindustan Lever, ITC. They are fairing okay but a lot of the market is still on the sidelines, it is still very nervous and still very frustrated and relatively quite fed up. You are going to see the Nifty stable at 5800 at least a couple of weeks before you get some of the old traders back and excited into the markets once again.