In an exclusive interview with CNBC-TV18, Sandeep Shah, CEO, Sampriti Capital, speaks about the markets and gives his outlook going forward. He says, a correction in the markets is imminent. “We have already seen the best results, we have started seeing the poorer results start flowing in and the fact that we are likely to see little bit of earnings downgrades would lead me to believe that a correction is more likely.” Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Markets may hit a new high, Titan best pick: Jhunjhunwala Stock picking should be for long term: Warren Buffett ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Here is a verbatim transcript of the exclusive interview with Sandeep Shah on CNBC-TV18. Also watch the accompanying video. Q: Couple of days back we were dangerously trading close to your stop loss of 5,500, do you think that stop loss is still safe or would you worry? A: To put things in perspective, since January I had been saying that the stop loss was 5,400-5,500 and the April high was 5,399. The last time when I came on your show, I revised my target for the index to 5,400-5,500, so at that point of time I hadn’t mentioned stop loss. The market has broadly corrected from 5,470, but it is early days yet and it could always go back up there. There are two-three important messages, I would like to give. One is that the market has corrected 10% or more almost every three months and that has coincided with quarterly results. In July 2009, in November 2009, in January this year, in April this year and now we are again in July and we have seen the best results came out early. This time I think the result season also seemed to have started a little later on. I have been saying that the earnings upgrade cycle has already peaked. This quarter there are chances of more downgrades than upgrades net, that is the second thing. The third thing I have been arguing for and I have been saying, the day Greece was downgraded, coincidently I was on your show, and when I was asked about Greece, I dwelt about 30 seconds on it and I started talking about growth. At that point of time, I remember there was a little bit of puzzlement that here we have Greece downgraded and here I am talking about growth. And now it is growth, which is occupying the headlines everywhere. The message that I want to give here is that besides the fact that US has shown signs of slowing down substantially, I think the sovereign debt crisis is not totally behind us. You cannot rule out the second innings in the sovereign debt crisis, it could always happen. China has bounced back to some extent and one would continue to watch China very closely because it remains the best proxy for global growth and it has consistently been the lead indicator. India has been dancing on its own tune, but what is happening right now is that as globally markets are going up we are finding that India is finding it a little bit more difficult to outperform on the upside, given that we had outperformed when markets were actually coming off. Q: On that earnings point, what would you whittle down on the full year’s expectations, given what you have seen and on which parameter would you do it, primarily on margins and bottom line? A: The only thing that matters ultimately is profits. But I think it’s important to look at top-line growth, in India we are seeing top-line growth. If you look at elsewhere in the world, the issue is that earnings are growing, but macro fundamentals are deteriorating because companies are simply growing on cutting costs, but that is not the issue here in India. At best case, we are looking at 20% growth. This year I think we are going to see downgrades, some of them we have already seen. But there is a sense that growth is now flattening out at the highs, but that is not a concern, growth is still quite strong. So, at this stage, one is not really concerned about growth per se in India, but the only point is that the earnings upgrade cycle has peaked. To the extent that we see earnings downgrades, we may see corrections from time to time and every three months we have seen a 10% correction, so we are right at that window all over again. So, yes, margins have been coming off, but to the extent that if commodity prices cool off again then margins may not be such a big issue. But what is happening also is that the excess capacity is getting utilized in lot of sectors. So, to that extent, it’s not so easy to grow profits by increasing margins because you don’t have spare capacity any more now. Also, the fact that if interest rates continue to harden, we might se some tapering off growth, the word I amusing is tapering off rather than slowing down of growth, tapering off of growth on the consumer side as well.

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