Markets to enter a consolidation stage: Baliga

Fundamental Analyst Ambreesh Baliga says that the markets are going to enter a stage of consolidation.

The markets may move up and may reach around 11,000 or 11,200 on the higher side of the range.

He says that this is a time for investors to buy with a long term perspective of around one year to 15 months. Those investors who are holding midcap stocks should continue to hold, if they have the power to hold.

He said that the frontline sectors are IT, Pharma and FMCG.

interview with Fundamental Analyst, Ambareesh Baliga of Karvy Stock Broking:

Q: Do you think yesterday’s bounceback is sustainable, or are we still in a tricky territory?

A: I think we are still in a tricky territory. I think it is more of a pull back. Possibly the market could go up another 200 - 300 points. Then I think we will enter a phase of consolidation, which could be a wide range of consolidation possibly between 9,800-10,000 levels and on the higher side 11,000-11,200 levels.

Q: One word on the sort of buying that was coming into the frontliners, are you advising your clients to go out and buy or otherwise?

A: For the last three sessions we have been telling our clients to go out and buy. In fact we have been 70% in cash before this crash and post that we have been asking our clients to buy and telling them to invest 20-25% of their investable surplus. I have told them to look at the next 12-15 months time period and one could see a downside of another 800-1000 points but its surely a time to start buying.

Q: What are you advising your clients in midcaps?

A: If people have the power to hold on for the next one year or so, we are suggesting to hold on. But those who have taken funding, we are asking them to exit at higher levels because if the markets start to come down again, these same brokers will force them to sell those shares. Basically we are checking out on the holding position of the clients and if they are able to hold on, we are asking them to hold.

Q: One word on RPL, what would you advise people to do now?

A: I don’t think it will come down very much from here but those who are buying RPL should have atleast a two to three year view and if one is satisfied with this stock doubling in the next 2-3 years, only then one should buy. Don’t expect this stock to run up to Rs 100 in the next 3 months.

Q: Where in the frontliners are you seeing buying opportunities?

A: Immediately we are buying in IT, Pharma Stocks, FMCG and going ahead if the market falls then we will be buying into metals, engineering stocks. We see lot of value in this space where the valuations have come down to realistic levels.

Q: What about Bata India and Hindustan Motors?

A: One should sell Bata India at these levels and for Hindustan Motors, if it comes down by another Rs 3-4, then it is a very good opportunity and even at these levels it is a decent opportunity. One can get Rs 10-15 on these stocks over the next six to nine months but again one can expect an immediate bounce back.

Q: What do you make of this opening? It is a bit sluggish for sure. Do you see it falling through or holding a weakish kind of range?

A: It is difficult to say whether it will fall through or not, but I think it will be quite volatile even during the day. It is difficult to say whether it will close up or down. One thing, which is clear is that, in any market public participation is needed and in this market, I don’t think there is any public participation at all. People are so bruised and even if the market moves up, there will not be any follow up support. I don’t think that will be there for a couple of months, going forward. So there is no way the market can shoot up much more from here. I think that is quite clear.

Q: Just compare this with October. Do you think this time is different from October?

A: This time is different because in October people must have lost just two months of their earnings. But in this fall I think people must have lost one to one and half years earnings. People are bruised so badly, so I don’t think they have the conviction, confidence or the money to come back to the market and start buying. I think it will take a while for these people to come back. Until then I really don’t see too much of a momentum in the market. They could be supported at lower levels from the funds that are buying but the follow up support, which normally comes from the public, will not be there.

Q: The only space standing out is Nalco, Hindalco, would you buy anything there?

A: Not now, I would rather wait for a fall there. Whereas I will surely pick up stocks in IT, FMCG and Pharma. People should buy metals but at lower levels.

Q: What about the real estate stocks? Anything you would be picking up from that space?

A: That is one space from which I would be thinking of getting out. The DLF issue is a great opportunity for people to exit the other realty stocks, which have been flying. Anyone who has some space in his backyard, has become a realty player. I think it is getting a bit too dangerous in this space. I think it is time to exit the realty plays and get into a lot of other stocks where there is value today.

Disclosures:

I don’t hold positions in Hindustan Motors and Bata India, but I have picked up stocks in the last three days, although we haven’t discussed those stocks.