Mumbai: The benchmark Sensex index on the Bombay Stock Exchange crossed 18,000 points in early trade on Wednesday but Ramesh Damani, a member of the Bombay Stock Exchange, said in an interview that he would be surprised if the market reaches a new high in 2010. Edited excerpts:

Do you think all is well with the bull market that started about a year ago?

Yes, it seems that way. I think we are in a low volatile and a very stable sort of market scenario. (But) bull markets always worry and the only worry is...if you remember, during the Budget there was a lack of consensus and a lot of pessimism around. Now I find cheery consensus...But consensus is generally not good for the market.

In this fiscal year, are there chances of a new high for the market?

Market moves: BSE member Ramesh Damani.

Tactically, how are you approaching the market now? Are you taking profits because of valuation concerns in any of your holdings or do you think the prudent thing is just to hold?

I think the latter. On the margin, maybe we are selling something here and there, but broadly the idea is that long-term investing is back—you want to hold on to the stocks and ride through any pain that you might see. I think the kind of viciousness in fall, which we saw two years back, is unlikely to be repeated now.

There is an interesting observation made in the West that it is companies such as General Electric Co. that are beginning to break-out. So from here on, it’s about the large-caps rather than the small- or mid-caps.

This debate has somewhat been trivialized over the years that you buy large caps, you buy small caps...the idea is you buy value.

Is there value in the large-caps?

If you do select, I would say yes. For example, I would suggest that there is a disconnect between the prices of real estate that we are seeing on the street, whether they are quoting at Nariman Point or somewhere else, and the market capitalization of the underlying stocks. So I can see value in the property stocks.

I am a bottom-up guy, so rather than buy the real estate index, you do a bottom-up picking and you find value. There are fairly large-cap stocks in real estate, but you do see value out there.

What about the aviation sector?

I have booked some profits in airline stocks because we just had a great run...we had 5X (5 times) move in six months compressed time period and there are still difficulties facing the sector in terms of fuel prices and government policy on airlines.

But it is a sector we look at opportunistically. If we find value again emerging, we would definitely step in and buy.

I think not only Indian airlines, but global airlines are also a buy at some point. I can see airlines going into a period of extended good performance over the next four-five years.

How much probability would you attach to the event of a big bubble building up once again in equities, real estate and commodities at some point in 2010? Do you think we could see a frenzy kind of situation if all goes well and this trend continues in the next two-three quarters?

I somehow doubt that. Bubbles don’t happen in an interval of two years, they take a period of 8-10 years. In terms of broadly traded asset classes, I don’t see any kind of bubble being formed. In fact, I see no evidence of a bubble being formed in (Indian) equities.

Even if you see it difficult for the market to get to a new high, do you feel that for this new year, we may have built a new floor?

It would seem that way. The markets typically would do this—they go through patterns of huge volatility and then move sideways for a period. If we go back to our own market, we went from index level of 600 in 1989 to 4,500 in 1992 and then the next 10 years we spent in a broad range of 2,500-4,500. But in terms of the index, you went nowhere. In fact, the rupee also depreciated. So in rupee terms, we did not deliver any significant returns in the index.

We could be entering a similar phase.

People who can pick stocks, people who can find winners, will do very well, but the broader indices may remain under pressure with the high being 21,000 and low being 15,000-16,000. I could see a period of low volatility for another six months, 1-2 years.

Some interesting mid-caps have come with a hue while there are dead sectors that are moving after a long time, whether it is tyres or paper. Is it time to start looking at stories like those?

I think so. A friend of mine advised me on how paper cycle has revived and he was bang of target. Clearly, tyres are doing well.

You will see a sudden spurt rather than see the entire basket move at a time.

It is a good place to look at. You will find good consumption themes in those stories. You will find well-run companies with 20-30% growth rate still available at 7-8 PE (price to equity) multiples, good prospects ahead, so certainly I would look at that.