Motilal Oswal, CMD, Motilal Oswal Financial Services Ltd says that even though the markets have run up, there still are opportunities in the Auto, Telecom and FMCG sectors. He still does not see any sign of 2007 kind of euphoria in the markets and expects quarterly numbers to be better than earlier expected. Here is a full transcript of his interview with ET Now today:

How are you scanning the current financial environment, equities looking overpriced right now or do you think there is still more room to run up?

I would say, selectively, in a few sectors we are quite positive - like automobiles or telecom or FMCG companies or a few infrastructure companies. So, I would take a sectoral and bottom up approach. Although the markets are absolutely overheated and I think there is definitely time for some kind of correction.

The big fear all around the globe is that as central banks start to tighten their monetary policy and slowly liquidity is sucked out of the system, we will see these markets sell off a little bit, do you think that is a risk that is right around the corner for us right here in India?

In India, I do not see really any kind of tightening of the liquidity in the short term. The government definitely is trying to institute a balance between growth and the interest rates and my belief is that we are not going to see any kind of hike in interest rate in short term.

As a house you have always liked auto as a space, FMCG as a category, both these indices are at the new high, auto and FMCG, do you still like them?

Yeah, right, the way numbers are coming - Bajaj Autos sold 1 lakh Discover bikes in first 50 days of launch - you have seen Marutis and Hero Honda numbers. So, I would be quite positive at these levels as far as the auto sector is concerned. As far as FMCG is concerned definitely the stocks have moved up and there is not really enough headroom from these levels, but, for long term investors I would definitely continue to hold even those sectors.

It is often said in the market that the retail investor comes in last and gets out last. You represent a premier retail brokerage, what is happening there, are retail investors back, are you getting a sense that euphoria which we saw in 2007, early part of 2008 has already visited or revisited our markets?

I have not seen any kind of euphoria as far as the number of investors coming to the market is concerned, the way we had seen in 2007. I think number of new customers being addition there month on month, it is increasing but I do not see any kind of desperate buying or frenzy buying from those common investors.

So many IPOs have hit our market, typically IPOs come when the market is peaking. Also, the kind of price movements that we have seen not just 
from the March lows but from the beginning of the year, it has been a liquidity driven rally. What is your estimate now on the amount of liquidity that we can expect in the markets by year end?

If you look at the recent IPO in the last week which has closed Pipavav- I think a huge amount of money has really come in and that was also the case with NHPC and Adani Power. I think there is a fair amount of interest in the IPOs. My sense is that if the price is reasonable perceived by the market then there is a huge amount of money which can come to the IPO in the market. So I do not see that too many issues coming in here and I do not see any very big size IPOs hitting shortly in the market. I think the key will be the price at which the companies are willing to leave something for the retail investors.

Once again estimates on liquidity, how much liquidity do you think this market can supply to absorb new fresh offerings on the block?

I do not really know the exact number as that is really the result of what kind of activity we see in the secondary market - because primary market will attract more money if the secondary market is really in good shape. I do not see any reason for the secondary market to really react in a big way, although small-small corrections will keep on coming but my sense is that overall environment is quite optimistic. Quarterly numbers are expected to be fairly better than what we all thought. So, my sense is really that we are not going to see any kind of serious correction or any kind of negative news flowing.

You are a listed company, it is a listed stock. You represent a brokerage business. How is the business environment for you?

If we compare this year compared to last year, lets say in terms of market volumes, the first 5-5 months is really much higher than what we have seen in the last year. Say for example first five months daily average volume is more than about Rs 95,000-98,000 crores, which was about Rs 61,000 crores average for the whole last year that is 2008-2009.

So, 50% increase in daily market volumes, I think it is a good indicator about activity level in the market and you have seen our first quarter numbers. I would be quite optimistic for this year overall compared to last year. We may not see the 2008 kind of huge euphoria coming to the markets, but, I would say this market is quite stable in terms of volumes as well. We are not seeing a huge amount of volatility and economic indicators are all moving up, so we are there with the market.