Mkts to stay in 16,500-17,500 range: Notz Stucki

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Mkts have put volatility behind: PN Vijay Real estate continues to be sluggish ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Reliance Power | Steel Authority of India | Tata Steel |

Anil Singhvi , Partner, Notz Stucki feels that the global cues have been pretty bad and one will continue to see those kinds of quarters for at least four-six quarters. "I think we are going to still see a lot of choppiness in our markets. Markets will remain very volatile because we are not decoupled, we are completely coupled with the global cues",he said." Singhvi expects the markets to remain rangebound between 16,500 and 17,500.

Excerpts from CNBC-TV18's exclusive interview with Anil Singhvi:

 

Q: What is your sense is there more downside to this market?

 

A: Global cues have been pretty bad and I think we will continue to have those kinds of quarters for at least four-six quarters. We are going to still see a lot of choppiness in our markets. Markets will remain very volatile because as I have been maintaining that we are not decoupled, we are completely coupled with the global cues and I do not think that there is any news that is there in the next month or two in India, which can really take our markets into a completely different part. So I expect markets to remain rangebound between 16,500 and 17,500.

 

Q: You think the Budget will be a non-event as well then?

 

A: I have been always maintaining that Budget used to be an exercise to Budget the Balancesheet of the Government of India and I continue to have the same views. Mostly, I think it is created by the media. So I can blame the media that creates so much of expectations out of Budget, which Budget obviously cannot deliver. I think this is not one day in 365 days when one expects all the goodies to be there - Budget was never meant to be for this.

 

Q: How are you approaching Reliance Power now in the light of the bonus etc at Rs 400?

 

A: I am clearly amused by this whole exercise of bonus and I really do not know how a company can decide that one shareholder will get and one will not get shares - I do not know. It is really challenging my own knowledge of Companies Act and the corporate governance as well; on this being a listed company and another listed company being a shareholder of that company.

 

So it has really completely baffled me and amazes me that how can we cure a situation, which has gone beyond our control.

 

Q: You would not buy it at Rs 408?

 

A: No, I will not look at it,  because there is a bonus or there is an impending situation whether fundamentally the company has that kind of a room for valuations or room for growth to come in to valuations and I do not think at Rs 408, there is any room for valuations to really perk up from these levels. So I am not a buyer even at Rs 350 for that matter.

 

Q: Did you have a look at the prospectus of Rural Electrification , how do you rate that as an IPO?

 

A: As I have been telling you, my view on the power sector per se, particularly the power generating companies and power distribution companies is not great. We still believe that there is more room for valuations left in manufacturing of equipments. So we still continue to maintain that power companies in India do not have that kind of pocket of valuations, where you can get 25%-30% returns.

 

Q: Banks have cut rates for the second time in one month. How do you read the whole interest rate situation and how would you play the rate sensitive now?

 

A: I think the cues are very clear; the RBI is more concerned about inflation. So I don't think they would adopt easy monetary policy for next two-three quarters because inflation is a major concern and let's not get guided by the WPI numbers - I would rather look at CPI numbers which in India, to my mind, should be around 6.5-7%.

 

So I don't think RBI would be looking forward to a monetary policy which is easier and going to look at lowering the interest rates. But banks, looking at the demand supply situation; they may tinker with 25-50 bps because they are definitely seeing a bit of slowing down in the offtake particularly in the mortgage market and personal finance market.

 

So banks will take a view irrespective of RBI's policy measures on the monetary policy and some banks may on account of seeing the growth - it's like, if a product is not selling what one would do? One would reduce the price to sell the product. So I don't think today they should be looking at RBI to guide their own profit & loss account and balance sheet. So some banks may take a cue out of this and reduce by 25-50 bps. But they are largely driven by their own demand-supply and growth prospects of the individual balance sheet.  

 

Q: How would you approach metals now because that space has also got cut up quite a bit? The way SAIL , Tata Steel fell off yesterday even Nalco. Would you buy anything there at all now?

 

A: We think that there will be a global slowing down in 2008 and first half of 2009, which will have an impact on most commodity markets because they have had a huge commodity run in last three-four years. So we are not bullish on the commodity and especially metals as a play; that we can make lot of money out of that. So we have a very cautious view on this because we will go through uncertain and slowing-down times in next four-six quarters in the global economic growth.

 

Q: How are you approaching this market because a lot of even medium-term investors seem hesitant to buy above 18000? When asked them they said, "We are waiting for 16000 to start buying, we believe those levels will come." Do you agree with that kind of an approach?

 

A: Lets us look at in a perspective as to what we saw in December and until about first fortnight of January; market seemed to be going at 20,000-21,000 and everyone was hoping and expecting that they will go to 23,000-25,000; and there came the jolt the and they all came back to15,500-16,000. After having seen 15,500-16,000 market, obviously, anyone would look at that perhaps as the bottom and one would rather go for bottom-fishing in these kind of uncertain markets. I think one can never time the market; I think it will be right strategy; one should look at a bottom-up approach rather than looking at top-down approach.

 

So I would reckon that most people should be looking at fundamental plays rather than getting into momentum play and looking at the indices to suggest whether they should be a buyer or a seller.

 

I am not a technical analyst but I would always look at fundamental as a point to make investment.

 

Q: What would you do in the technology space that did not fall with the rest of the market now; some midcap technology stocks are bouncing would you buy IT now and would you look at anything in midcap IT at all?

 

A: Our view on IT stocks has been that they are very defensive stocks and we like them because I think the companies have that bandwidth, companies have the wherewithal to go through this adversity, which they are faced with. So I am sure that IT sector per se would outperform the market next one-two years time. We do not look at it on day-to-day basis. But we believe that large IT companies are far better-off to really put their businesses back in order as compared to the smaller ones and I am not too pessimist about the rupee-dollar situation. I think rupee will be rangebound between 39 and 40 and at that price, I think the company should have 25% EBITDA margins. So they should do much better than the broader market in next one-two years' time.

 

Q: The two sectors where people seem to be chasing some near-term momentum are fertilizers and sugar , would you buy either of these two?

 

A: I think they are pretty much momentum plays and they are so dependent upon the government policies and we are almost now getting into the election mode -  they are not going to be favourable to the market because the government would be a favouring farmers and consumers rather than favouring the companies. So I am not too optimistic about fertilizers and sugar both.

 

Disclosures:

 

It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.

 

 

 

More to come...