Careful now! FIIs may exit as fence sitters enter: Baliga

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Careful now! FIIs may exit as fence sitters enter: Baliga

Baliga feels that once these people start investing, then we might see liquidation from FIIs because it is liquidity driven. "Even if a bit of liquidity moves out you can have a big correction."

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » 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

The market witnessed a huge rally on Wednesday backed by foreign inflows. Nifty closed above 5,500 mark, this has shocked people who missed out on this rally , said Ambareesh Baliga, chief operating officer of Way2Wealth.

"All fence sitters are now calling up to checkout whether they should invest at this point of time," he told CNBC-TV18.

However, Baliga feels that once these people start investing, then we might see liquidation from FIIs because it is liquidity driven. "Even if a bit of liquidity moves out you can have a big correction," he added.

Below is the edited transcript of Baliga's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.

Q: Huge rally yesterday, how would you call it now for the index?

A: We were discussing a few days back that there could be a surprise on the top, which could take us to about 5,600-5,650 levels and we are moving towards those levels. The way people have missed out on the rally, all the fence sitters are now calling up to checkout whether they should be investing at this point of time. That is what we will finally top it off.

When you have all these fence sitters getting into the market possibly that is the time you could see liquidation from FIIs because it has been liquidity driven. What we have seen in 2011 was a bit of liquidity going out, just about Rs 2,700 crore and we saw fall in the market. This 800-900 points of rally requires Rs 22,000 crore. So, this shows that even if a bit of liquidity moves out you can have a big correction.

Q: How are you approaching the independent power stocks which rallied 10-15% yesterday on the Coal India news?

A: It was based on the news and after a long time we have got some positive news bytes as far as the power sector is concerned. It is expected that they should rally for a while longer. This could also give an opportunity to buy Coal India at a lower level. One could short Coal India and go long in power stocks, so in case we see Coal India closer to Rs 320-322 levels that should be a good level to buy from a longer-term perspective.

Q: What about a stock like Tata Motors ? What do you do there?

A: Tata Motors is for a life time highs. The January figures have been quite decent inspite of the China figures being quite pathetic. But, going ahead for Jaguar-Land Rover (JLR) to hold on to those gains month on month could be a bit difficult, so at these high levels its prudent to book out to a certain extent.

Q: How would you approach Voltas and Lanco ?

A: I do not track Lanco very much. Although we have been fairly positive on Voltas, but the move which we saw yesterday was a surprising. We utilised that to a certain extent to book out. Whatever we had bought at Rs 70-80 levels we booked out yesterday.