Expect market to remain range-bound for next 12 months: Devesh Kumar, CIMB India

In an interview with ET Now, Devesh Kumar, Country Head, CIMB India, shares his views on the market rally. Excerpts:


ET Now: How confident are you about this rally that we have been seeing?

Devesh Kumar: The market is going to remain range-bound and in current trend, it is moving up, but nobody is very sure about what is happening at the ground level and therefore we feel that the market will continue to remain range-bound between, say, 5400-5500 and 6500 or so.

The reason being if you look at current result season, probably some good news has come. You find that commodity prices are falling, all that is positive has been factored in and a lot of liquidity is flowing in, but it is not that somebody is buying this market with a lot of conviction.

We are meeting a lot of investors and at the current juncture, liquidity-driven rally will come to halt and then as and when some news is there, that will also be factored in. Informed investors are still sitting at fringe and so we feel that for the next 12 months the market will remain a bit range-bound.

ET Now: Give us some names in the large cap space which you find are fairly valued and where investor should actually go ahead and book profits then.

Devesh Kumar: As far as stocks are concerned, as per my compliance, I do not talk about stocks, but I can talk about trends and if you look at longer term, then with a two-year prospective one can buy this market, but at the same time if somebody feels that this market is going to move and rallies there, then you may be making the mistake of buying certain stocks which should be avoided.

Therefore in each sector you have to identify stocks where balance sheet is strong and where it is not over-leveraged, where assets are of good quality.

Going forward in the next 12 months there will be a lot of restructuring and a lot of assets will change hands whereby some balance sheets will be built and wherever the balance sheet is not good and asset side is very weak whereas leverage is high, those businesses will collapse.

ET Now: Which particular pocket are you looking to focus on here?

Devesh Kumar: If you look at the banking sector and wherever the focus is on good quality retail business or wherever housing and such assets are there, they will do well, but wherever too much of exposure to infra and other activities is there, we feel that there one will continue to see some stress.

My personal view is that if you look at the banking sector, they will continue to show you a mixed story and the stress on the balance sheet of a couple of banks, where they have been very liberal with their advancers, may continue to come out, but the story will be similar in various other sectors as well.