Brent could rally up to $86-88 if there is no conclusion on Iran nuclear talks: Sandip Sabharwal

In a chat with ET Now, Sandip Sabharwal, asksandipsabharwal.com, shares his views on crude prices and metal stocks. Excerpts:

ET Now: Metals have largely not performed. Now there is a global cue China has cut rates, could that lead to a brief rally or could it be more sustainable in nature?

Sandip Sabharwal: That is the strange feature of today’s global economic scenario where when Japan cuts or infuses liquidity or when US or Europe cuts, the real commodities or the real inflation does not move up but it is the asset prices which move up. However, if China cuts liquidity, it leads to a bump up in commodity prices.

Most metals and commodities are hugely oversold. In fact, Brent crude has not been so oversold over the last 15 to 20 years. A bounce was in any case imminent and this will add to that. So, we will see these commodities like iron ore, coal, copper, crude etc bumping up by at least 5% to 10% from here.

ET Now: And would that have a negative repercussion on our equities considering the correlation to crude cool-off in India?

Sandip Sabharwal: It will put an upper lid on where the markets could go and the shift of market performance will happen where the banking sector led the rally till now. So, we could start seeing banking slightly underperform. Companies like Coal India or the metal companies like steel or aluminium companies could see some momentum.

ET Now: Could it be slightly pronounced rally or would it fizzle away in couple of things? To an average investor or trader who wants to look at these stocks, what would your advice be?

Sandip Sabharwal: I do not think it will fizzle away in couple of days but it should last for a couple of weeks at least. For crude, today's Iran talks are very important. If they reaches a conclusion, it will put a lid on crude prices. If there is no conclusion and an extension, the scenario where brent could rally up to $86-88 should play out.