2010 Sensex range seen at 15000-19000: Ambit Cap

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2010 Sensex range seen at 15000-19000: Ambit Cap

Being bullish on the market post recent correction, Andrew Holland CEO of Institutional Equities and Equity Proprietary Trading, Ambit Capital Pvt Ltd, said, the first half of 2010 would remain volatile. Sensex range for 2010, he said was seen at 15,000-19,000.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS UBS Sec: Good level to enter mkts, suggests stocks Experts see more pain for mkts, suggest strategies Mkts may consolidate until Budget: Quantum Securities ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

Q: What have you heard about the FII flows over the last three weeks because they seem to be continuing both on the cash market and also on Nifty futures? Do you see this spilling over into the month of February and going into the budget?

A: A lot of the selling has come from ETFs. But it's very hard to put numbers around it. There have been quite a number of long only funds as well selling out, which is more for the fact that valuations in India were getting too high and the risk usually not being priced in, not just for India but for all emerging markets. So we have seen money taken off the table. As we have seen before, India whilst it's a great story, when things go wrong globally risk gets taken off the table and safety is where you go.

We came into the year as I mentioned in the beginning with risk kind being swept on the carpet and everyone expecting emerging markets to continue their great run of 2009. This year is going to be more difficult year - a difficult first half. It's going to be stock picking, which is going to be the key to success and I don't think we can have that kind of macro liquidity driven rally that we have all enjoyed and got overfed on in 2009. So it's going to be a more difficult year in that respect.

But I am still optimistic that India remains backend 2010 earnings story going into 2011 and that is really where we are going to see the performance of the Indian market.

Q: What are the chances that second half remains as volatile and in fact even to go as far as to say that 2010 may turn up to be a year of negative returns from emerging markets?

A: You can never rule that out but I think that India will see a good 15-20% gain by the end of the year. Our range for this year, for the Sensex, is 15,000-19,000 and that is where it will end up towards the end of the year. I think in 2011 its going to be a great year in terms of earnings.

As we start looking towards 2010 earnings, again we will start to price that in. So where would the index be in 2012? A lot higher than we have today. I would guess probably nearer to double of where we are today.

Q: Are any of these cash calls being taken with the budget in mind - taking the budget into consideration?

A: The budget over the years - we have had few surprises here and there - but everyone's focus now on the budget will be towards fiscal deficit and I am little bit less concerned about that given that the GDP growth in India should continue to rise and if the government can do the right things then hopefully they can start to get real foreign direct investment into large expansion plans that they have and therefore the deficit to my mind is less of a concern.

But I don't think it's ahead of the budget. It's more to do with that coming into the year everyone was just too optimistic, likely to expecting the global stimulus to continue, no tightening. People have just been shocked into that there are risks and that is really what's been happening. But valuations were not supportive - the backend of the earnings seasons was not very supportive either.

If you are expecting any kind of analyst upgrades for this year and that was spilling over in FY11 it didn't really happen. Therefore you are really kind of looking around to see how you could support valuations at the 17,000 levels and no one could. So you have the double whammy of markets turning negative globally and plus no real support in terms of leaders, in terms of the Sensex or the Nifty.

Q: So anything close to 15,000 levels you would start accumulating stocks in India now and if yes then which sectors or which clusters would you choose from for your first few purchases?

A: I would be buying on any dips now towards 15,000. 15,000 is just very attractive but it's always difficult to call final bottom. So I would be starting to increase my weighting now. I would like to be a little more defensive. I think IT, FMCG and telecoms would be my kind of main bets. Outside of that, obviously, Reliance always remains a key stock to be holding or buying.

I am getting a little more optimistic on real estate and banking for the first time and I think valuations will start to look more attractive. On real estate it is not because I expect residential prices to rise, I expect them to fall, but I am getting more interested in the fact that commercial property is now starting to see some demand and there is retailing revolution happening.

I think shopping malls is going to be something that would be talking more and more about in future. So I am getting more and more interested in real estate sector.

Q: How carefully have you been looking at the primary market offerings specifically coming from the government?

A: It's all about pricing. We have been speaking to a number of investors they are very skeptical on the NTPC in terms of the bidding by a number of government-owned institutions and one client said to me, "I feel like just selling it all back to them because its been manipulated." That is how a whole lot of people felt.

Whether that is true or not is a different matter but that is how foreign investors were looking at NTPC and that is why they have really shied away. I think long-tem NTPC makes a good bet but it was spoilt by how the auction went.