Ambareesh Baliga, managing partner, Edelweiss Financial Services, in an interview to CNBC-TV18 said the Nifty is rallying on the back of low inflation numbers. April’s Wholesale price index inflation, that came on Tuesday, stood at 4.89 percent, way below market's expectations.
"Given the fall in inflation, people are expecting atleast 50 bps rate cut over the next few months because I don't think the governor will then have any reason not to cut rates going ahead," adds Baliga in an interview to CNBC-TV18.
Meanwhile, he is more bullish on banking sector than autos and realty.
Below is the edited transcript of Baliga's interview to CNBC-TV18
Q: Do you see more upside after this breakout?
A: Yes, we are in new zone so we possibly should see new highs in the near future. ‘Near future’is possibly the next couple of weeks because when one has relentless liquidity, one really doesn’t question why and what. Also, the sort of inflation figures which have come in, I think that has been the biggest trigger for the market. This is because people will expect over the next few months atleast 50 bps cut because I don't think the governor will then have any reason not to cut rates going ahead.
Also, the forecast that we will have an early monsoon is quite positive and MSCI weightage being changes I think that is the third positive for the market. So, from these levels, there may not be too much of a downside immediately. However, I suppose politics is the biggest risk, because of which you have a lot of volatility.
Q: The problem is the rally is coming with a string of lemons from earning season, Manappuram General Finance yesterday, this morning United Spirits and then Orchid Chemicals. What did you make of the Manappuram numbers because a lot of analysts are almost writing that stock off after seeing last quarter results?
A: That is true. With the way the gold prices have corrected and the questions on the asset quality has clearly put pressure on that stock. However, in that sector, the only stock where we are seeing some hope and asking people to hold on is Muthoot Finance. So, that is one stock in that sector which can possibly be held on.
Q: Which of the three interest rate sensitive sectors would you be willing to chase in this rally, banks, autos or real estate?
A: Clearly, it is going to be banks. They will be the biggest beneficiaries because at these levels we are finding real estate expensive at these levels. In autos, we have seen good rally especially on Maruti as well as Tata Motors more or less at their highs. So, from here immediate upside may not be possible so the best pick would be banks.