Tips42

Speaking on the current rally, S Naganath, President and CIO, DSP BlackRock Investment Managers, said the road ahead will be a little more bumpy and in that regard, therefore, this rally probably will be peaking out right now. He, however, added that maybe a mild correction will be back up.

Agreeing with Naganath, Vetri Subramaniam, Head of Equity Funds at Religare Mutual Fund, said looking at the markets already rallying about 35%, "one is somewhere in that territory where one should be looking for it to top out rather than to keep extending." He said, "I would tend to fall in the camp which says we are pretty close to some sort of a peaking pattern over here," he said.

Here is a verbatim transcript of the exclusive interview with S Naganath and Vetri Subramaniam on CNBC-TV18. Also watch the accompanying video.

Q: Where do you stand on that debate, do you think we are almost getting cooked with this rally or it still has legs?

Naganath: It is a difficult question to answer. Given the repetitive rally and return of risk appetite certainly it is heartening to see the market having done what it has in the last few weeks. I would tend to think the road ahead will be a little more bumpy and in that regard, therefore, this rally probably will be peaking out right now, maybe a mild correction will be back up is my guess.

Q: Globally too the same prognosis you think?

Naganath: Yes, same thing globally as well.

Q: What about you, are you in the camp that believes another 15–20% is possible in this move or we are about getting to the ceiling of this one?

Subramaniam: There are two ways to look at it. One is to just look at past history and what kind of movement we have seen in these sort of sharp and sudden rallies, or call it a bear market rally or whatever you will. In 2001–2002 we got something like about a 45% rally on the Sensex. If you look back then most of the rallies were much smaller than 25–27%. If you go all the way back to the late 90s, you will find that the rallies were anywhere between 35% and 70%.

My guess looking at that we have already gone about 35%, you are somewhere in that territory where you should be looking for it to top out rather than to keep extending. So, I would tend to fall in the camp which says we are pretty close to some sort of a peaking pattern over here.

Q: And then what when you say volatility––are you suggesting that the market could go back to where it came from or not quite retest of the old lows just yet?

Naganath: It is very hard to tell but given the pace of the move that we have seen recently and the belief that some of the efforts that government and central banks are taking to kick start growth in economies, it is quite conceivable that we may not retest the lows. We may slide somewhere between the lows and where we are today and then maybe move ahead in the second half of this year.