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Nilesh Shah, MD and CEO of Envision Capital, said it's quite possible to see a 3-5% trading move from here. In the largecaps, earnings have not been too disappointing, in the midcaps it's been a mixed bag. While the policy announcement has been a combination of factors, so all this has enabled markets to reach 17,000. But there are more disappointments coming in as we go down the year and it will be difficult for markets to sustain a significant rally.

Excerpts from CNBC-TV18’s exclusive interview Nilesh Shah:

Q: How much more would you give this market on its upward trajectory now the monetary policy is out of the way?

A: It's quite possible that we might see a 3% to 5% trading move from here. What we have clearly seen over the last few sessions and last few days is the fact that in the large cap space, earnings have not been to disappointing, it's been a mixed bag in the midcap space. Secondly, the RBI credit policy is basically continued with the status quo, and there haven’t seen any significant changes in the interest rates. Third is from the policy environment - for some of the export oriented sectors certain policy benefits have got announced. So it's been a combination of all this plus the fact that this market from a leverage perspective, or from a participation perspective is reasonably light. So all this has enabled the market to reach a level close to about 17,500. But we have to now keep in mind that the upsides from the current level could be a lot more challenging. We are already trading at about 17.5 times based on the current year earnings and the year has just started and we could still have some more disappointments coming in as we go down the line. So it is going to be difficult from these levels for the market to sustain a significant rally.

Q: There is one school of thought emerging that maybe now for the month of May to July, there might be some more strength in equity markets globally till as you indicated the corporate earnings or the slowdown globally that’s manifesting itself in corporate earnings, would you say that’s a do able prospect right now that we might have another block of strength in the next few months?

A: That’s quite possible because if you really look at it, the global equity markets have bounced back pretty well from their lows in a very short period of time, and this is applicable for the markets right from the US in the West over to China in the East - so you clearly see the situation where the equity markets have already bounced about 10% to 15% from their lows and this is primarily by policy response which is more at the macro level and it's really not been a response to how developments have happened in the micro level - whether we talk about consumer or corporate confidence or we talk about corporate earnings and it's quite possible that the impact of this policy response might be a lot more enduring than what we could generally believe. So it's quite possible that we still could have a few weeks of strength before actually the ground realities take shape and maybe at that point of time, we could be probably headed slightly more on the downside of the trading range. It’s quite possible that we might see some strength before we actually give of some of the gains that we have had in the last few weeks or a few months.

Q: How would you position yourself on the banking space after having seen the monetary policy?

A: The monetary policy; the banks could face some pressure down the line when the liquidity tightens and obviously in the short term they benefit because they haven’t been an indication of increase in interest rates. So there is some short term palliative, positive for these banks. But going forward what is really going to determine the prospects for these banks is the extent of provisioning and how they would be able to cope up in an environment where there is a general slowdown. In addition to that the very well managed banks are trading at expensive valuations and they could almost continue to sustain them. But on the whole, the monetary policy has been a bit positive for these banks but the medium term prospects have really not got changed or affected by the monetary policy.

Disclosure: We have vested interest in the stocks/sectors that have been discussed.

Source: Moneycontrol.com