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May 30, 2013 01:01 PM IST | Source: CNBC-TV18

Downside limited for Nifty; monsoon key trigger: Baliga

Nifty may find good support at 5940-5970 levels. On the upside, the Nifty can touch 6,300-6,350 in the next few months on the back of persistent liquity inflow.

Ambareesh Baliga, Edelweiss Financial Services expects the Nifty to find support at 5940-5970 levels. Given that the Nifty managed to bounce back from lower levels in the last few days, indicates that the downside is limited, he said in an interview to CNBC-TV18.

On the upside, he sees the Nifty touching 6,300-6,350 in the next few months on the back of persistent liquity inflow.

Also read: Mkt giving confusing signals; Nifty to break 5970: Sukhani

Below is the verbatim transcript of hsi interview to CNBC-TV18

Q: Just winding up with the series, what are your expectations of the market as it steps into June?

A: Clearly the downside is limited, we have seen that despite a major cut which we saw in the last two occasions. The market has been able to bounce back.

So clearly the bottom is defined. There is an extremely good support at about 5940-5970 levels. The way the liquidity is coming in we clearly expect the markets to head higher. We will not really be surprised in the next couple of weeks, if not, in the next one-two months we should be able to see levels of 6300-6350.

Q: What do you do with Tata Motors now after seeing yesterday’s numbers?

A: Numbers were better than the street expectations so possibly we could see some bounce from here. However, we are still a bit concerned about the Chinese demand. Although Chinese helped JLR in the last quarter but going ahead we are seeing some amount of slowdown.

JLR may not really be able to help the local numbers which will still continue to be weak over the next two-three quarters. So, at higher levels Tata Motors would be a decent sell.

Q: What do you do with a stock like Housing Development Infrastructure Ltd (HDIL) and the news flow surrounding it?

A: In the last one and half to two years there has hardly been any good news in HDIL. Realty sector is seeing a slowdown and now with the airport project being off them it is a major negative. So, even at these levels it is a sell.

Q: What do you expect to see from DLF, that has been reasonably stable amongst this entire set?

A: DLF the numbers from the normal business would still continue to be weak. They have been selling assets which is clearly positive, but that is already there in the price. So, I really don't see much of an upside.

Q: What are your expectations from Mahindra & Mahindra (M&M) numbers today?

A: M&M numbers should continue to be strong. It is one of the few in the auto pack which should still continue to perform better. So, our pick in the auto sector would be Maruti Suzuki and M&M, but Maruti would be at lower levels.

Q: So what is the next trigger for the market aside of liquidity as we look into the June series?

A: Monsoon would be one major trigger for the markets,as it is expected a little early. So that would be one trigger because of which you will see the food inflation starting to move down.

Already we have seen overall inflation on the way down, that is going to be a major trigger. With that possibly we should have the cuts. Infact we expect that we should have at least a 50-75 bps cut in the rates going ahead in the next six months.

Q: Do you expect to see the market broadening out at all in June?

A: Participation will still be an issue. Unless, we see a major consolidation in the range of 6000 to 6350. Once people are quite sure that the markets will not really breakdown, what we have seen in the past has made people extremely circumspect, cautious about the market. Due to which we are not seeing broader participation.

However, I suppose the next move will be in case we see that between 6350 to 6800. That is the time you will have lot of fence sitters who have not been in the market for the last few years actually coming back and that is the time you will see their broader participation.

Level of 6350-6800 is possibly the level in the market where the public will make money. Till date most of the Indian investors have not really been making any money, it has basically been the institutions.

Q: There have been some fairly dramatic moves on pharmaceuticals as a sector – Sun Pharma, AstraZeneca Pharma and Ranbaxy, yesterdays Wockhardt performance on the other. What are you buying from there?

A: In the past couple of years there is a shift from the old boys to the new ones. We have seen the performance of Cipla and what happened in Ranbaxy. So, if you are talking of five-ten years back the portfolio would have had a Dr Reddy’s Laboratories, Ranbaxy and Cipla as stock buys.

Focus is now clearly shifted to Sun Pharma, Lupin and Dr Reddy’s. That is one of the few old boys which is still performing. So, these are our three picks in the pharma sector.

Q: Any thoughts on a stock like Shree Renuka Sugars, what did you make of the numbers there?

A: Numbers were more or less in line, but we don't see any sort of trigger in the sugar at least in the foreseeable future. In fact we don't see the sugar prices moving up from here.

So, at least for the next two-three quarters it is still time to ignore the sugar stocks. Although they have corrected decently well in the last 12-15 months, but still it is not a time to buy.

Q: From the pharma space which ones would you buy and which ones would you avoid?

A: In pharma we are currently buying Sun Pharma, Lupin and Dr Reddy’s. We have been buying these for a while. The ones which I am ignoring are Ranbaxy and Cipla.

Q: Have you changed your mind of metals after looking at the recent results or do you still stay shy of that sector?

A: After the results both Tata Steel we have suggested a buy at lower levels. Even Hindalco Industries should be a buy at these levels. Hindalco has more or less bottomed out at that range of Rs 90-95. After that we have seen a decent move, but still it is a buy at these levels. Tata Steel also can move up to levels of about Rs 380-390 over the next couple of months.

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