Market upside capped till state election results, says Motilal Oswal's Rajat Rajgarhia

Rajat Rajgarhia, MD - Institutional Equities of Motilal Oswal Securities, spoke to CNBC-TV18 about whether the current stock rally is a counter trend rally or a new trend.

"Right now the market is oscillating between the two near-term trends; one is the sudden drop in oil prices, which brings moment back to India and second is elections. So over the next few weeks these two trends will largely determine the market and therefore the range of the market could be a big range than earlier thought," Rajgarhia said on Thursday.

"The markets have rallied 6-7 percent but the upside will be capped till state selection outcome," said Rajgarhia.

Talking about the earnings growth, he said, "For the last 5-6 years, September-October-November have started fearing this period because four years back during this period there was collapse in oil price, then there was  demonetisation and this year NBFC issues and oil surge."

"From an earnings point of view, right now we are at sub 4 percent corporate profit to GDP, which is at a very low point and many sectors are making negative contribution to earnings pie," he said, adding that any earnings recovery would only be from costs coming down in terms of currency stabilizing and global commodities correcting.

Sector specific, he is upbeat on the telecom space, especially Vodafone-Idea. According to Rajgarhia, "The sector has seen turbulent times over the last decade but the worst of the disruption in the space is likely behind us now."