See Sensex bottoming around 12,300: Deven Choksey

Yesterday's euphoric rally was short lived. The markets opened with sharp cuts and traded deep in negative territory. However, attempts at a recovery were curtailed by the crude spike and weakness in the global markets. The Nifty closed at 3,925 down 167 points, while the Sensex shut shop at 13,094 down 570 points

Deven Choksey of KR Choksey Securities sees the market bottoming out between 12,800 and 12,300. "I think the market should bottom out, stabilize, consolidate, and thereafter decide its further direction. We may see some amount of stability returning back to markets another 500-800 points from now. At those levels, investor would find a little bit more comfort thereafter. Technically, the market is appearing very weak. As a result, one last fall has to happen. Thereafter, the market should start its stability and recovery in the following days."

He does not expect the inflation figure to come as a shocker. "Even if it is going up, it will inch up marginally. The market has already factored it, so it won't create any havoc."

Excerpts from CNBC-TV18's exclusive interview with Deven Choksey:

Q: Do you think most of yesterday’s optimism has been wiped out by today’s performance?

A: Yesterday’s optimism was largely driven by massive short coverings and nervousness of bear operators, who probably couldn’t withstand the kind of a fall or find any kind of alternative but to square off their positions. The nervousness continues because even after restoring their positions back, post the short covering, they have probably gone short today on global cues.

In intra-day movement, we are seeing short covering back in the market. So, the bears are not very convinced to go short at this point of time, unless there is a fresh round of cash market selling. In such a situation, we will see the market bottoming out in the next 500 points between 12,300 and 12,800. Around this level, the market should bottom out, stabilize, consolidate, and thereafter decide its further direction.

Q: What have you been telling your clients because some stocks have been up today? Are you advising small purchases now or do you think those opportunities will come at better price points in a few days?

A: Better prices are always given. In a falling market, every second day is a better day to purchase. However, investors still have to buy some companies which are available at good valuations. Those valuations are available in the market. Obviously, clients are coming in, but the kind of conviction to go ahead is not there. Investors probably end up buying 10-20% of he required quantity that they want to buy, and are awaiting further falls to buy.

There is a general enquiry on the client side as far as quality stocks are concerned. They are ready with cash, maybe at an appropriate time, if they see stability, more money will come into the markets.

Q: What’s going on with some of these power names like Tata Power, Suzlon, and Reliance Infra over the last few days?

A: Valuations of Indian power companies are at least four times higher than their international counterparts. A global fund manager, who is deciding his fund allocation, wouldn’t pay for the kind of valuations that Indian power companies are currently enjoying. These valuations were not going to sustain. We are wondering why this kind of sell off that we are seeing today has come so late. Had it come earlier, it would have probably justified the action of some of the fund managers globally that valuations of Indian power companies are far more higher compared to their global counterparts.

Q: There is lot of reticence among the mutual fund fraternity and PMS managers when you talk about redemption pressures. Is the retail HNI crowd letting go of a lot of their personal stock over these past few days?

A: I don’t know. We are not seeing much redemption pressure on the PMS side. When we talk to mutual fund clientele in the brokerage business, they say they are finding it difficult to meet investors. At the same time, they are not seeing aggressive selling pressures.

Investors, particularly those who are investing in mutual funds, believe that the market has already shaved up considerable amount of gains and probably their mutual fund NAVs are in losses. They would like to hold on to this particular investment and hence we don’t see too much pressure at this point of time being built up by the client.

How long can it continue though is not known? We may see some amount of stability returning back into the markets after another 500-800 points fall and investor would find a bit more comfort  thereafter.