Experts see mkts at new highs, advise sectors

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » RELATED NEWS IMF official warns of bubbles in emerging markets Corrections in '10 to be more aggressive, violent: JPMorgan Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Positive global cues propelled the markets higher today. But are these moves likely to last? Sudarshan Sukhani of Technical Trends does not think so. He says the market breadth is weak with fewer and fewer stocks making 52-week highs. "The advance-decline numbers have been very unfavourable. The rally started on Friday afternoon and it is already up almost 200 points on the Nifty. The attempt to 5,180 could very well carry but it is very difficult to breach that level in the near future or close above it." Going forward, he expects choppiness or sudden turnarounds in the markets.

However, Sandeep Bharadwaj, CEO, Head-Equity Strategy, Tower Capital, sees the markets trending higher. "Till December, we should trend higher. The Nifty should make new highs for the year. Most of the consolidation is over. Our view is that we will take out 5,350. On the higher side, 5,550 should be achieved by December-end."

Anu Jain, Vice President-IIFL Private Wealth Management at India Infoline, too sees the markets at new highs soon. "With the kind of strength you are seeing in certain sectors, it would be a matter of time before you make a new high. It would be a lot more dependent on world markets like before. If you see any big moves up or down on the other side, that could create either a consolidation period again or it could give you that impetus for breaking over 5,110 levels."

Investment Analyst R Balakrishnan also expects the market's good run to continue. "The global cues are fairly good, the fund flows are strong, the earning story is good. I think the momentum is definitely on the positive side. The market mood is a bit cautious, but still positive on the whole."

Similarly, Amit Dalal of Amit Nalin Securities expects another 50-100 points rally on the Nifty if global markets continue to participate for another week.

On sugar:
Buy sugar stocks on dips, says Sukhani. Dalal too expects sugar companies to do better next season. "South and western region companies are showing far better performance mainly because they haven't got into political controversy on sugarcane pricing. I don't understand why they are not able to come up with a formula which is fair to sugarcane growers as much as it is to sugar companies. You can have a base price and then you share some part of the upside, if there is any, when sugar harvesting season starts and whatever realisations are reached at that point of time."

On shipping:
Portfolio Manager PN Vijay is overweight on the shipping space. "The Dry Baltic index catapulted because of over-demand. China changed it stance in October and started becoming a huge buyer of ore. This led to the rise in the Dry Baltic index. But there is still a lot of oversupply of tonnage globally, especially in the tanker side. Many Indian lines are on fixed-line charter. I see the Baltic index trading positively in the next 24 months as global trade expands. So, those companies which track the Baltic are still good buys because they have got beaten down a lot. "

On telecom:
Adrian Mowat, Chief Asian and Emerging Equity Strategist, JP Morgan, says he would not take a contrarian call on telecom as pricing competition can lead to a huge dent in telecom growth.

The telecom sector is a huge avoid for Bharadwaj also. "We have had a sell on this sector exactly two years ago in November 2007 when the telecom ministry came up with the idea of giving more telecom licenses. Since then we have foreseen this whole scenario. It will get uglier before it gets any better. For the next 1-2 years, telecom companies are in a suicidal mode. You have got 5-7 companies coming in. We need to see how they survive. For new telecom players, it takes about five years for them to break even. The break even time will get stretched out to 7-8-9 years or probably they may not even break even." He feels TRAI needs to change its stance as far as the consolidation among telecom companies is concerned. "One company should be allowed to take over the other even if there is a overlap on the circle side, which is not there so far."  Bharadwaj sees further downside from here. "We remain mega bearish on the telecom sector."

Vijay also sees blood on the street for the next two years. "You will get these shares around these same prices even a bit later."

On midcap IT:
Dalal expects midcap IT to continue to attract investment due to relatively lower valuations as compared to industry leaders, which is almost 20 times forward at present. "There is going to be some switching taking place from the largecaps to midcaps when people start seeing the index going up to new highs. Fund managers want to perhaps lower their overall risk to the market."

On aviation:
The worst is over for aviation stocks, says Dalal.  "There is definitely a call that if the worst is over for everything else, then the worst should be over for aviation also. Hopefully, the business scenario of aviation will show us some more respite next year. You do not have any other danger looking at this sector except the way the volumes and pricing continues to be under stress. Once that shows some relief, institutional following into these stocks will come in."

On media:
Investors should pick and chose media now, says Vijay. "The sector suffers from competitive pressures and lack of government policy initiatives. The media is subject to a lot of control in this country. This space has not participated in this whole bull market. I would really like to do some bargain hunting. Television and the DTH are more exciting because with the internet coming, print is sort of dying off."