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• Vibhav Kapoor of IL&FS feels the market is in a base formation process now. He sees the Nifty range at 4,500-5,200 in the near-term at least.The upcoming election outcome and the budget will be the key triggers for equities, says Kapoor, who feels, asset quality will be keenly watched in the third quarter earnings announcement by India Inc.On the much-anticipated Reserve Bank policy meet, Kapoor says, he does not expect a CRR cut on January 24. After turning negative in the previous month, industrial production bounced back to a five-month high of 5.9% in November 2011 led by a recovery in manufacturing, a development that may reverse the negative sentiments. Encouraged by the data, the government said it would adjust the policies to sustain growth momentum.

• However, Kapoor said, the performance of critical sectors like capital goods and infra will continue to lag behind for some more time.Market shrugged off the positive IIP data yesterday, mainly due to the poor Q4 guidance by IT major Infosys. India's second largest software exporter cut down its annual forecast indicating weak demand ahead for the Indian IT space.  Shares of Infosys tanked 8.4% at close on Thursday, its biggest fall in nine-months. "I think Infosys looks attractive at Rs 2,500-2,550 levels," says Kapoor. Going forward, Kapoor says, oil prices will need to be watched carefully as he expects liquidity may fuel a rise in the commodity.On the rupee, he expects the currency is likely to trade between 50 and 52 to a dollar levels in the near-term.

• Q1: What are your thoughts on the Nifty's pullback from 4,500 to 4,850?

• A: The Nifty continues to be in the range of 4,400 on the downside and 5,200 on the upside. This range has probably shifted a little bit now, maybe 4,500 on the downside and 5,100 on the upside. The market has been trading in a range for the past several months and the rally from 4,500 is just a part of that range bound play. I think some sort of base formation is beginning to take place in this range now.

• Q2: Will you bet on Nifty for major upsides from here? Do you think another 150-200 points max and the market will tire out?

• A: Nifty can move upto 5,000-5,100 levels at max in about two months. The first week of March is crucial as we will have the state elections and the budget. These two events will play a very vital role in determining the course for rest of the year.

• Q3: Do you think any disappointments on earnings front may terminate this short-lived rally?

• A: A part of this rally is happening as stocks have plummeted to very low levels prior to the results. Traders cited a good opportunity of making some quick money till the results come out. Once the earnings season is over you will probably see the market sort of topping out at that point of time.

• Q4: What would you do with Infosys?

• A: A lot of uncertainty exists because of the poor guidance and what the next year is going to hold. The company has done reasonably well but a lot of it has to do with the rupee depreciation rather than operational metrics. The stock will probably remain in a range till the next guidance comes out in April. However, at lower levels close to Rs 2,500-2,550 it looks pretty good on a valuation basis. The top which we saw two days ago before the results is probably not going to get broken on the upside for some time now.

• Q5: What is the key risk for the market once earnings season is out of the way? Do you think the market will approach the UP results and the budget with any optimism? Are you sensing any room for a pre-budget rally or a big slide?

• A: Normally market does witness a pre-budget rally but if the market goes up another few percentage points by the end of earnings season, it's probably difficult to conceive of a rally beyond that pre-budget.  The market is going to approach budget with some caution as we have a major problem with the fiscal deficit. Dalal Street will closely watch how the government tackles fiscal deficit issue in the budget going forward. RBI has done its job in raising interest rates to a level where inflation is probably coming under some control but the second competent of that is fiscal deficit. If the fiscal deficit is not up to the market expectations or not controlled properly, it could prevent interest rates from going down too much further and that would not be so good for the market. Also if one looks at the oil subsidy situation it's going to be pretty tough for the government to balance its books properly. I don't see too much of a pre-budget rally once the market has reached 5000-5100 levels.

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