It’s been one of the most range bound April series that the market has had in a long time. On F&O expiry day, Ambareesh Baliga, COO, Way2Wealth finds there is a lot of adverse news every day, leaving investors to wonder what else can go wrong.
The possibility of breaking the 200 day moving average (DMA) over the next couple of days and in the May series possibly plunging more towards those 5,000-5,050 levels is quite high.
Below is an edited transcript of his interview. Watch the accompanying video for more.
Q: 5,200 has been held for the series. Do you think in May we will plump to lower levels?
A: That is quite possible because every other day we wonder what else can go wrong and every day we get enough adverse news, which comes on a daily basis. So yes, it is possible that we could break the 200 DMA over the next couple of days and in the May series possibly plunge more towards those 5,000-5,050 levels because clearly here we have a government, which is sending out messages to the international investors that we don’t care.
If that is the case then I suppose why should international investors come in? That is the only thing which is supporting the Indian market in the last so many years especially if you see January-February. So if that money doesn’t come in, there is no reason as to why the market should remain at these levels.
Q: What kind of downside risk do you approach the next series with? How bad do you think it could get?
A: On the downside risk, I have been saying for a while that about 5,000-5,050 but if it breaks that, I don’t have any further target after that. The best possible scenario is just maintaining status quo like what we did in April. Remain between these levels of 5,150 to about 5,300 which is the best possible scenario. I don’t see the market breaking on the top.
Q: We have seen some serious damage in infrastructure stocks over the last few days. Names like Lanco, Hindustan Construction and even Larsen & Toubro (L&T) have started crumbling. Do you expect to see more pain or are you telling your clients to buy?
A: There could be some more pain. We should remember that in the last four months we have seen extremely good moves in most of the infrastructure names. We have seen some 50-60% or slightly higher moves in some of them. So it is quite natural that they would correct and we were expecting that for a while.
One silver lining from the ratings agency S&P is they have given a clear message to the government to kick start the economy and one of the best ways to kick start the economy is in the infrastructure space. With interest rates again expected to come down after the 50 bps cut, I think rest of the year we can expect at least another 50 bps possibly by September to December quarter. So looking at that, yes, I suppose infrastructure space should be bought into on dips.
Q: What are you telling your clients to do on the frontline IT stocks - Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies now?
A: Clearly the results showed that Infosys is the odd man out because if you look at HCL Technologies and TCS, it is surely much better than what people were expecting. Wipro more or less was inline. Infosys is clearly the odd man out which is going to affect the valuations going ahead. As I was saying last time, we should see levels of Rs 2,200, we saw that, we have seen a bounce back but one should not expect this bounce back to last. I suppose the only pick in the largecap ones is HCL Tech and TCS for the time being.
Q: Any thoughts on some of those high-flying faces like Jubilant Foodworks and VIP etc because turn-by-turn some of these stocks have been moving?
A: Absolutely, there are hardly any trading bets in the market. Clearly these are the ones which are giving you those trading moves so utilise that but surely from an investment angle or a fundamental point of view not at these valuations. The risk-reward ratio is surely not favourable but yes, being like high beta clearly it gives you those trading opportunities.