UR Bhat, MD, Dalton Capital Advisors believes the market currently seems to be consolidating at around 8000 levels. The next move for the market is only likely after the credit policy on September 30 and the half yearly results.
According to him with lack of positive triggers, it would be difficult for the Nifty to breach 8250 level and would be rangebound between 7,850 and 8,250, given the macro situation and unlikely rate cut.
With regards to sectors that could out perform going forward, he thinks cyclicals would continue to be the favourites especially with renewed hopes of an economic revival, policy momentum and so advices buying them on dips.
Stocks like Larsen & Toubro ( L&T ) and Oil and Natural Gas Corporation ( ONGC ) both look interesting on back of economic revival and positive policy outcome.
If one is talking about growth momentum picking up then one should look at sectors like cement, engineering, EPC because these are spaces where one is sure to find value, feels Bhat.
Meanwhile, small investors should look at investing in blue-chip companies for reasonably good returns, says Bhat.
According to him midcaps like Arvind , Ashok Leyland , Voltas , Crompton Greaves are likely to consolidate post their re-rating. However, FMCG is unlikely to participate in the next run for the market, feels Bhat.
On the larger scale, Maharashtra assembly election results could have only a one day impact on market and not more believes Bhat.
Also read: Nifty upmove to continue; resistance at 8130-8140: IIFL
Below is the transcript of UR Bhat's interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18
Sonia: It was a very interesting week because we had that blow out performance on Thursday but then over all for the week we ended flat. What's the sense that you are getting about why the market saw that big move and also what the way forward could be?
A: Thursday figures suggested that there was no big buying by either FII's or domestic institutions. It was purely a tactically rebound largely because the market participants, quite a lot of them had gone short on the US Fed decision. With the US Fed decision being what it was they were forced to cover, that must be the real explanation for what happened on Thursday.
Otherwise the market is consolidating reasonably well. Even the correction has not been very steep. At around 8000 level it's consolidating very well. The next move if anything will be probably after the credit policy and after the half yearly results.
Anuj: This week we did see a bit of shift to defensives. IT did well; Tata Consultancy Services ( TCS ) in fact hit a market cap of almost USD 90 billion. Do you get a sense that IT, pharma and FMCG might drive the market from hereon and cyclicals might take a bit of a back seat?
A: Well the sector rotation keeps happening but I am not very sure whether FMCG will participate in a very big way in next run if there is one. But cyclicals are all over the favourites at least given the macro set up that we have. If there is going to be an economic revival, if there is going to be a policy momentum coming out of Delhi, cyclicals are one that should do well. This dip would be a reasonably good buying opportunity because nobody has still lost hope on action from Delhi. So there should be something that's coming there.
Sonia: So would you look into buying names like Larsen & Toubro (L&T) which fell about 2-3 percent this week or would you look at the big gainers of the year which has been the oil and gas names like ONGC etc?
A: Both of them look interesting however, if there is going to be a revival in the economy, stocks like Larsen and Toubro (L&T) should certainly do very well. But the Oil and Natural Gas Corporation (ONGC) types are sort of policy dependent. Therefore we should see what is going to happen on the subsidy regime, what is going to happen about the gas price regime. It's all contingent of that and there is lot of hope that things will happen there. However, that space needs to be very closely watched as far as policy initiatives are concerned.
Anuj: What about some of these midcap names, the likes of Arvind, Ashok Leyland, Voltas and Crompton Greaves which are sort of being re-rated this year from their lower levels. Do you get a sense that they will see some profit booking now because valuations have run up or would the flow of money keep supporting these stocks even at higher levels?
A: The flow of money will keep supporting these, not that they should go dramatically higher from here because there is lot of hope that is resting on these scripts at current prices. So unless there is some sort of a momentum on the policy front in terms of new investment proposals taking shape, maybe they will sort of consolidate at these levels or if there is disappointment and nothing happens for the next six months then there would be a correction. But as of now the hope is still quite robust so they would probably consolidate at these levels.
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