Ambareesh Baliga, Edelweiss Financial Services is not very optimistic on the Nifty given major bounce in gold and silver prices on Wednesday.
"Political risk will be the biggest risk for the next few months. Although macro data is better, structurally it seems that we have bottomed out, but I do not see Nifty breaking 5,400-5,800," he said in an interview to CNBC-TV18.
One should sell if Nifty reaches closer to the upside, he suggested.
After Tata Consultancy Services (TCS) reported better-than-expected result, the focus will now shift from Infosys to TCS and HCL Tech. “Valuation for Infosys will therefore, move down. The premium they got in the last nine-ten years will disappear to a large extent,” he added.
Metal stocks may witness further upside if the verdict of Karnataka iron ore mining ban is positive. "Overall, there is pressure on metals and that will play out in the longer term. I would utilise this upside or the upside that we see in the next few days to exit some of those stocks rather than buy," he added.
Below is the verbatim transcript of Ambareesh Baliga’s interview on CNBC-TV18
Q: The metals came back quite sharply on Wednesday and there is an extremely important verdict expected today on the iron ore mining ban, how would you approach metal stocks?
A: This seems to be on the bounce back and in case there is some positive outcome from the case, then one could see some more upside.
However, overall there is pressure on metals and that will play out in the longer term. So, I would utilise this upside or the upside that we see in the next few days to exit some of those stocks rather than buy.
Q: What would be your approach for the general market? Are you more optimistic on the Nifty?
A: Not very optimistic at this point of time, thanks to gold and oil that we have seen this major bounce back. Political risk is going to be the biggest risk going ahead at least for the next few months although macro data is better, structurally it seems that we have bottomed out. However, I do not see us breaking this range of 5,400 to 5,800.
Therefore, on the upside 5,800 would be a major barrier for the market. In case we see levels closer to 5,800, I would utilise it to sell, but at the same time I do not see the market cracking much below 5,400 on the lower side even if there are some political statements that could have a kneejerk reaction.
Q: How are you going to approach IT this morning after looking at all the big results?
A: TCS was no doubt slightly better than what was expected and there will be a shift from Infosys to TCS and HCL Technologies. Therefore, the valuation for Infosys will move down. The premium they got in the last nine-ten years will disappear to a large extent. So, there will be a clear shift.
Q: Do you expect any more pressure on gold finance companies or enough done?
A: We see a further cut in gold prices. Right now, we have seen only small respite after the crack that we saw in the last one week-ten days. However, in case we have a further cut of 5-7 percent from here you see further pressure on these stocks.
Q: Are the calls for rate cut getting stronger, after the last inflation data?
A: Absolutely. After the data that came out and also going ahead we will have a softer current account deficit (CAD), there is an expectation that we will have at least 25 bps cut this time onwards.