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Speaking to CNBC-TV18 Nilesh Shah of Envision Capital says the market is going to find it extremely difficult to move out of a trading range for the next three-four months. It is only going to be during the second half of this financial year before which the market is meaningfully able to trade above the trading range at which it is hovering right now.

With regards toInfosys numbers, he says one has to give credit to Infosys for at least giving a guidance which is broadly not below expectations. In this kind of an environment a 15% guidance is pretty good

Excerpts from CNBC-TV18's exclusive interview with Nilesh Shah:

Q: What do you think; you have heard of the Infosys guidance now between Rs 92.3-93.9 how do you see the stock reacting?

A: The stock could probably open up slightly positively. But I guess I will probably remain very flattish. I don’t expect this guidance to basically drive the market up or drive up the stock price significantly barring a short lift 4-5% trading move. However the medium-term trend of the stock will really get determined when basically numbers from the old economy or numbers from the manufacturing companies come out. The broader expectations for the largecap companies are 15-20%.

Now Infosys has given guidance around 15%, it remains to see what really the rest of the companies do. If they kind of give a guidance of 17-20% then my sense is that the case for a further re-rating of Infosys may not be there or re-rating for the tech sector may not be there. On decline or sharp corrections liquidity may still flow into the non-technology side.

However if the manufacturing companies or the non-technology companies deliver earnings growth less than 15% then you will probably see a case for liquidity to flow into technology on the back of a PE re-rating.

Q: What would you do with a technology as a space right now if you had to do allocation by way of portfolio and with the kind of concerns there are on earnings for the old economy like you indicated? How much would you want to allocate to technology?

A: At this stage it’s best to remain neutral and I am referring this from a medium-term perspective obviously in the short-term it has the potential to give some amount of a trading rally. In addition to that globally most people expect the dollar to be relatively strong given the weak performance that the dollars had. So I think these two would be the triggers, which would give some trading gains.

But for an institutional investor I guess at this stage it’s best to be neutral to the sector. So if you are following a particular benchmark and it has a particular weight I guess you need to align the technology weight along with what the weight in the benchmark is. However the medium-term view will really get decided upon what the rest of the companies do and that would actually become a more of a relative call rather than an absolute call.

Q: What is your own sense by the time we are done with earnings and those two policy meetings -one our own and one from the Fed what do you think the market will be doing?

A: It’s unlikely that this market will be able to come out of a trading range because I think while we would be broadly through with the two policy announcements but we would still have to grapple with the weekly inflation data and by and large most economists and most analysts do expect inflation to go up a little higher though it might peak out sometime in April but whether inflation is going to sufficiently come out during May and June I am not too sure. Secondly it’s going to be a while before we are through with the earnings season because most of the non-technology companies will come out with their numbers early sometime in May and June.

In addition to that I am not too sure whether this market is going to be liberal enough to kind of give the benefit of doubt and not wait for the Q1 numbers which will unfold only in July and in addition to that is of course we are going to be kind of toeing with the forecast and the monsoons etc.

It’s unlikely or the market is going to find it extremely difficult to move out of a trading range for the next three-four months. Our own sense is that probably it’s only going to be during the second half of this calendar year or the second half of this financial year before which this market is able to meaningfully be able to trade above that trading range which it is right now hovering in.

Q: How important is earnings for the market right now or do you think its just struggling against too many other cues to focus on specific earning performances?

A:The earnings are definitely very important especially for all bellwether companies and clearly Infosys over the last several years has held its own relevance and importance for the market and on several occasions has basically turned around the sentiment but that’s been on occasion when they have given a much stronger guidance, when it has been a lot more euphoric or when the guidance has been ahead of the street expectations, so in that kind of an environment, it definitely has its relevance.

One has to give credit to Infosys for at least giving a guidance which is broadly not below expectations. In this kind of an environment a 15% guidance is pretty good. However it’s by and large there in the price and the market will want to wait for 1or 2 quarters or at least for the next one quarter, before it really seeks to re-rate Infosys.

In addition to that as I was mentioning even earlier, that its also kind of a relative game where you are really trying to see what are the other sectors going to be doing and if the other sectors don’t give good enough guidance than obviously Infosys and the entire technology sector will again kind of spring back to prominence but if that really is not the case then Infosys will be an important stock but will not be the market leader or will not change the sentiment or the direction of the market.

Source: Moneycontrol.com