Independent analyst Ambareesh Baliga explains on CNBC-TV18 that over the January series the Nifty may cross the crucial level of 6,350 supported by the probable cut in rates by the RBI on January 29. Baliga advises investors to sell Infosys on the first signs of weakness in the stock.
Technicals expert Sudarshan Sukhani of s2analytics.com adds that the intraday recovery was not on fundamental cues, but on technical triggers. "I think there is a trade still in the Nifty and the trading range has set in after an uptrend and can go anywhere. There probability lies in a breakout on the side of resistance, which means the Nifty could go to newer highs. It is a trade that investors might like to start today and carry it tomorrow."
Below is an edited transcript of Baliga's analysis on CNBC-TV18
Q: The inflation data and the deferral of GAAR have proved to be double-triggers for the market. How much of a positive momentum do you think the market could post on the inflation data and the prospects of a rate-cut on January 29?
A: After puzzling investors all of last week, the markets started on a new wave today. The market posted a strong move thanks to GAAR and the inflation data and I think this will continue for a while. Possibly that 6,150-level could be achieved soon and I suppose the rate cut of 25-50 bps should help the market reach new highs.
Q: Would you assume that the market has entered a new trading band after taking the current levels under consideration?
A: It is possible because once the market crosses the 6,030-6,040 levels it will be a new band which could the market to levels of 6,150-6,200.
Q: What is your position? What do you recommend investors do now?
A: I have been bullish for a while. Capital-goods, infrastructure, banks, auto and metals are the sectors to be in and not FMCG or even IT which has moved up very well in the last two days but in which I will not invest at these levels.
Q: Within the IT and the oil-and-gas sectors, if you have to choose a particular sectoral play which one would it be in the next three months?
A: I would choose oil and gas instead of IT because of the expected price hike. Stocks like Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) are moving up. Once the Oil and Natural Gas Corporation (ONGC) crosses the Rs 300-level, it can decisively move to levels of about Rs 340-350. Though it has just moved to Rs 305, but we need to see whether it stays there or not.
Q: For the rest of the series, what kind of an upside do you envisage on the Nifty?
A: In this move, the Nifty could go to levels of 6,150 and by the end of January when a probable rate-cut should be able to aid the crossing of the crucial levels of 6,350.
A: Frontline stocks will make the first move and jewellery stocks have already posted a decent move. So, I don't see much an upside for the segment immediately. So, it is the frontline stocks which I will buy for the next month, month-and-a-half.
Q: What about Infosys? It has been 20-percent up in the last two trading sessions. What do you recommend investors to do with that stock now?
A: For the time being, investors can just hold on although I am not too positive on the stock even after those extremely good results. Investors should look at selling when weakness begins to seep in coming in because this knee-jerk reaction has been overdone to a large extent and it is possible that the stock could see levels of Rs 2,900.
That is the reason I advise investors not to sell now, but get out when weakness begins to seep in as the stock is already too expensive even after the announcement of positive results.