Portfolio manager PN Vijay of askpnvijay.com says the increase in advance-decline ratio to 1.5 augurs well for the market as it is a key indicator of retail sentiment. Vijay is positive on LIC Housing Finance because of strength in net interest margins.
Gautam Sinha Roy of Motilal Oswal Securities adds that the oil sector is very lucrative with the government starting to hike prices of diesel and gas
Sudarshan Sukhani of s2analytics.com says that that the bias for the intermediate term is on the downside from current levels.
"The market hasn't reached the target of 5780-5800 and it could be lower. Once that is reached then the market would probably start a much deeper correction. But today’s decline has been the biggest in seven-to-eight days and the short-term intraday trader could probably make money on the long side by expecting a 40-to-50-point of rally. For everyone else, the position needs to be on the short side."
Below is the edited transcript of PN Vijay's analysis on CNBC-TV18
Q: If there is a pullback on the cards from the lower levels in the Index, what are the stocks that you would look to buy after the correction or pressure in the last two weeks?
A: I am a little shocked at the data flowing in. The Central Statistical Office announced a 5 percent GDP which Chidambaram hotly contested. But looking at today’s IIP data, which is negative for the second month and with even consumer demand cracking up, this is as bad as it gets, I guess.
If investors are buying into a possible 'buy the bad news' and probably hoping that such circumstances will force the Reserve Bank to further cut rates in March and force the finance minister to announce some real fiscal incentives to the corporate sector and individuals, investors should go for blue-chips. I think the correction really shattered the retail investor’s confidence which had slowly started to return.
From the very lousy advance-decline data over the last few days, it isn't surprising to see HDFC Bank and other blue chips adding longs. Even if there is a long rally, it would start with the blue chips. There are a number of opportunities with bank-stocks having corrected as the results were not too bad, the auto sector which is a question of timing and offers venues bottom fishing. But investors should stick to the top 100 or150 stocks on the Nifty.
Q: It seems like Thursday is going to be a very heavy day in terms of earnings with the likes of Tata Motors, State Bank of India and smaller companies such as LIC Housing Finance reporting numbers as well. What would your key picks be?
A: My pick is clearly LIC Housing because the risk is very little. It has been improving their net interest margins (NIM) and they have been hitting the mid-market in homes which is where the genuine home-users are. The manner in which funds have been raised and the NIMs have been slowly increased to come close to HDFC’s levels, makes the stock a very good bet. At a time when investors are very scared about midcap stocks, this is a good midcap stock which cam be bought before the announcement of results.
A: Investors thought that the dust raised by the 2G scam had settled, so this is quite shocking. Though Unitech has denied it, the market has turned very skittish on these stocks and has commenced selling. It needs to be verified if the news is true. These companies are in trouble if they were to be embroiled in such controversies afresh. But if these reports have been fabricated, then the stocks will quickly move back to their original levels. I think the jury is still out on that.
Q: How do you think is the market placed in terms of being influence by global markets? The European markets were pretty much flat but late buying caused the Nifty to close, up half a percent. What is your opinion on the global effect on the Nifty or the India markets?
A: At least in the last one-to-one-and-half- months, the Indian bourses have been totally de-linked from the global markets. And that is not surprising because the effect of domestic is driving the markets.
This is clearly evinced by the run-up before the credit policy, the IIP, the first gross domestic product (GDP) forecast amongst other news-reports. With the Budget at the end of the month, expectations are running high in the market. So the Indian bourses are totally oblivious to global markets at least for the next one month.
The key aspect to watch in the next few days is really the advance-decline ratio because retail sentiment is bad and the only way it can be judged is via the advance decline ratio. It was heartening to see the ratio at 1.3 at noon and rise to about 1.5 at the end of the day. But the advance decline ratio needs to be more positive for the bourses to breathe more easily.
Below is the edited transcript of Gautam Sinha Roy's analysis on CNBC-TV18
Q: What is your take on the Nifty in combination with the announcement of earnings from yesterday?
A: The Nifty continues to seek direction and fresh cues could come from the Budget which would be the next big event for the market. Apart from this, the market is also witnessing sectoral rotation. The oil and gas sector is starting to witness positive developments such as the hike in diesel prices and the likely increase in gas prices. So, that is a sector that we would be constructive on.
The IT sector could be red herring with acceleration in demand for IT services. Profitability in the telecom sector has begun to improve this year.
So, these are some of the sectors where the developments and the earning have been positive and invite our interest.
Q: Are you expecting a pre-Budget rally and what kind of upside would this market see from the current levels?
A: We don’t see any strong reasons for a pre-Budget rally. However, the Finance Minister has done a good job of setting expectations for fiscal consolidation in the Budget.
Q: What is your estimate on the banking segment and the divergence in terms of asset quality as well as earnings seen in the private versus public banking space this quarter?
A: Increased and continued NPA formation in PSU banks has emerged as an important parameter. The State Bank of India (SBI) results which are expected would be the bellwether to observe sectoral trends, but the divergence between the private-sector and PSU banks continues unabated.
However, if the rate cycle is turns beneficial, PSU banks would be bigger beneficiaries of rate cuts as well as the impending recovery in the economy . From this perspective, we continue to be constructive on PSU banks.
There are a lot of high-quality stocks in the private-sector banks’ space such as ICICI Bank, HDFC Bank, YES Bank and IndusInd Bank. So, though the overall divergence is there to stay, from a growth or economic recovery perspective, PSU banks are a better play.
Q: You hold a positive outlook on the oil and gas sector. Where would you invest in terms of individual stocks? Is it lucrative to invest in upstream companies or do downstream stocks look like a better option?
A: The upstream segment looks to be a direct beneficiary of the possible hike in prices and fall in underrecoveries. PSUs like the Oil and Natural Gas Corporation (ONGC) and Oil India are expected to benefit from the hike in gas prices.
Downstream companies would benefit from reduction in the voting capital and improved sentiment on the general increase in diesel prices. But investors have to be alert on global prices as Brent crude continues to be strong and could play spoilsport.