Cash out your profits before UP poll results: Sampriti Cap

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The relief rally is now a rally rife says Sandeep Shah (CEO of Sampriti Capital). The market is in animal spirits waiting for positive outcome on UP elections, good budget & a CRR cut. Though the weakest power & infra companies have doubled in value in 45 days, it is best to cash out some profit pre UP election results.

Q: We are levels at which you had indicated some caution. Where do you think the markets headed? Do you think momentum could take us higher or tactically would it look to take some profits off the table now?

A: Yes, what started as a relief rally is no longer a relief rally. This is now a rally rife with expectations, so it remains a liquidity driven rally. I have also mentioned that animal spirits can take the market far higher than one can forecast which is why I had not given any upside target. However, the market is not just looking and hoping for a positive outcome from the UP elections and therefore a good Budget but the markets are also looking now for a CRR cut. The market also has some expectations, which are there locally. Globally of course there is hope that the ECB will do second round of funding. Now it is not clear to me why that would happen. Therefore, the broad way that I would look at the market is that, you can continue to stay invested. If the market rises higher maybe if it goes up to say 5800-6000 before the UP election results, it might make sense to buy some protection. Otherwise, you could stay invested and enjoy the ride. Do watch the FI flows more carefully before you watch anything else.

Q: What do you do with sectors like power and infrastructure given how much they have rallied already in the course of 45 days?

A: If you look at some of the power or infra companies, some of these were trading below breakup value. In the sense, the market was saying that these companies are going bust. Now to that extent even if they have doubled they are still some of them are significantly down from their all-time high. In this environment you got to look for value. You have got to look for companies where even if all the expectations of reform don't materialize, these are companies that will withstand it. The promoters should have deep pockets or low leverage. Specifically as far as infra stocks are concerned this market rolls to higher levels, you could book some profits out there. Because we still need to see a lot more action. It appears now that the PMO was acting even if the government is not yet acting. However, the PMO is not enough to run a whole government or run a whole country. We need to see much more happen on those fronts. Though yes 5800-6000 if we get there, as I said animal spirits could take the market anywhere. It is very difficult to put up precise number on that. But if we got to those levels you should be look to make some profits or look to cash out pre UP elections because you don't know what's going to happen with the UP elections.