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Manishi Raychaudhuri, ED, UBS Securities, is still concerned about the global situation. Investors are still doubtful about coming in, despite more attractive valuations, he added.

He feels it is difficult to take a near-term call as a revival of interest is seen in some sectors.

The bulk of 2007 FII flows came in the last 3-4 months of the year, Raychaudhuri said. "A withdrawal was expected after such a huge liquidity surge."

UBS Securities has maintained its 2008 Sensex target at 22,000. "Earnings are expected to be inline with expectations. The Sensex target has been maintained based on FY09 earnings estimates. Decline in valuations due to risk aversion may not be seen in the future."

Excerpts from CNBC-TV18’s exclusive interview with Manishi Raychaudhari:

Q: Has the dust settled and is the market ready for an upmove?

A: I think it is difficult to say, at this point in time, because the investor base is still concerned about what happens in the rest of the world. Though, from an economic or earnings point of view, India’s correlation with the rest of the world may be limited, historically, the market movement in India and rest of the world-be it emerging markets or rest of Asia- has been significantly correlated.

There is still a bit of doubt whether to rush in into this market because even though the valuations have corrected from their peak, they have not yet really become dirt-cheap, as seen earlier during the May-June 2006 episode of correction or the May 2004 episode of correction. So, the investor base is still in two minds at this point.

Q: What about flows and the fact that we have lost USD 4-5 billion, in terms of outflows, in the last four-five weeks. Do you see that continuing?

A: We have to see it in the context of the fact that in 2007, we saw about USD 17.2 billion of inflow. Almost two-thirds of that came in last four months, from September to December.

Usually, such a high concentration of flows in a short span of time is followed by some degree of profit booking. Keep in mind that the rest of Asian emerging markets have started correcting from early December.

The correction in India and money withdrawal out of India was slightly overdue. It had started happening earlier in the rest of the emerging markets. It is very difficult to take a call on a short-term basis whether it would continue, going forward.

But at the margin, we have seen some degree of revival in interest, maybe not in the broader market; but at least certain sectors, which have may have underperformed in recent times. But at the same time their short-term triggers, in terms of the quarterly earnings or macro-economic tailwinds, have not been too bad.

Source: Moneycontrol.com