'RBI needs to pause, tightening can only be do so much'

In an exclusive interview with CNBC TV 18, Nitin Rakesh from Motilal Oswal AMC said the current downfall in volatility is good for the market sentiment, but there are two major triggers which could help the market go above 5,200.

1. A pause in rate hikes by the RBI

2. Down tick in inflation

He further said that “there seems to be more and more consensus being build that RBI needs to pause because monetary tightening can only be do so much to control inflation and we may end up cutting through the bone on impacting the demand.”

Talking about the interest-rate sensitive sector, he said banking and auto have the potential to turn around if domestic macro issues are sorted.

He also stressed that the markets are unlikely to go above 5,400 levels without a change in basic fundamentals. But, he added “even if that happens due to liquidity flows or rerating of India compared to China or some emerging markets, I think that basically means that we go back to our long-term period averages in terms of valuations.”

He said that from a long-term perspective, one has to look at domestic macro issues rather than just liquidity flows. " My sense is that over the next quarter or so, we might be heading into the bottoming of that cycle" . He suggested that India Inc needs to move away from the earnings downgrade cycle and the upgrade cycle has already begun with Hero MotoCorp, which posted a 19 percent rise in profits.

“I think the more upgrades we start seeing the better the market starts looking from valuation perspective and from longer term growth perspective.”

Watch video: Market awaiting RBI remarks for further cues: Motilal Oswal