Long-term invt should cherry-pick now: India Infoline

Q: Can July be more constructive than June?

A: Short build-ups have been made on expectations that the markets should further go down. If one macro variable turns positive, then the markets can have a very sharp turnaround and a very strong bounceback from the short-term perspective.

Even if you look at the longer-term, in six months the market will fundamentally look much better. The primary damage world over and more so in India has been caused by oil. In the last few weeks, India, Indonesia and China have increased petrol prices, which will have some dampening impact on the demand. Once the Olympics is out in the next 3-4 months, China will probably further increase prices.

Once oil cools down, the short coverings will start in emerging markets and particularly in India. Then you will see a bounceback in corporate earnings coming back to the market.

Q: For the next few months, what do you see in the markets?

A: I do not see markets going down too much from here, given the kind of short positions. I don’t see markets going down significantly from these levels because they have been hammered down. Most of the midcap stocks are near their historic lows in terms of PE multiples.

Although the interest rates are high and inflation is high, all those macro variables are negative at this time. Even then we are not in a scenario where the economy is going to go down to the growth rate of 2-3% and most people even the conservative or pessimists would agree that the economy will at least grow at 7% to 7.5%.

So, given all these variables, whatever damage the bears could cause to the market, has gone down. For long-term investors, it is a good time to start building a portfolio. It is not that you have to invest all your money tomorrow because we have 3-4 months of uncertainty and you may get much better opportunities to invest. But the downside is limited now.

Many FIIs and hedge funds do short selling by borrowing on P-note account, which would not appear from the futures short positions. Given all those factors, the market is technically poised for a small bounceback.

Q: What do you think about fertilisers as a sector?

A: There was a significant uncertainty for a long time. This policy brings a certainty on the kind of subsidies they will get and how pricing will be determined. So, that alone has brought some cheer to the fertiliser stocks.

Besides that, having a policy that is certain is better than not having a policy.

Q: What is your sense of the kind of broad range this market can move in over the next 3-4 months?

A: Over the next 3-4 months, it would move from between 4,150-4,550.

Q: How would you position yourself on the interest rate sensitives, given the interest rate and inflation scenario now, in the banks, real estate and even the infrastructure sector?

A: Interest rates are not going to soften in a hurry. There may be a small technical recovery. But they will continue to face significant problems. There will be a significant correction in the real estate prices all over the country, mostly in larger cities like Bombay and Delhi. So, these stocks will have negative sentiment for some time to come. Similarly, banks are also facing headwinds.