Correction overdue; expect 4800-4850 on Nifty: Baliga

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Time to book profits and exit positions, says Ambareesh Baliga of Way2wealth, adding that buyers at these levels will be caught on the wrong foot. "The rally could continue for a few days because of the momentum, but the correction is overdue," he said in an exclusive interview to CNBC-TV18.

When the market does reverse, Baliga sees the Nifty falling to 4800-4850 levels. "Investors should start buying again around these levels because the market will clearly be at much higher levels in four-six months," he explained. He further adds that the upside for the current rally is around 5200-5250.

Below is an edited transcript of his interview with Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: Which camp are you in for February?

A: I have been saying this for the last few days that the correction seems overdue, but because the momentum is there it could continue for few more days. But people should utilize it to exit to a certain extent than buy into this momentum because you will get caught on the wrong foot.

The way I see it is possibly we could see this correction taking us to 4800-4850. Around those levels I think we should again start buying because if you are talking of longer-term, the next four-six months, clearly I see markets at much higher levels.

Q: What did you make of the news flow on Ranbaxy and what could the implications be on both stock and business from here?

A: For Ranbaxy, whatever news flow has come seems negative, so clearly you will see the stock reacting. If you see the last couple of months, the news as far as Ranbaxy is concerned has been more negative than positive so you would see a knee-jerk reaction. But from a trading point of view, one could look buying at lower levels for a bounce back.

Q: How much would you give to the possibility that February actually sees a continuation of the rally, assuming risk on still stays and the market goes on to pierce that 5500 level that we have talked about for so many months?

A: Basically the expectations were low; the sentiments were pathetic when we went into 2012, so it was a point from where you really couldn't go down too much more unless there was major adverse news and that did not happen. The results which came in were slightly better than what most of us were expecting, so you clearly got that bump up. You even had positive noises coming from Delhi and that also helped the sentiment. The world news flow was also better, so that helped too.

Basically we have reached a point where you really require some news flow which will change the environment over a longer-term period, which I don't see happening in February. As far as we are concerned, domestically budget and elections both would be game changers going ahead, which again are quite some time away because of which I feel that February could be a dry month unless you have major newsflows coming internationally.

I feel that February could see slightly lower levels in range of 4800-4850 on the lower side and possibly 5200-5250 on the higher side. But for it to cross 5250 and move towards 5350-5400 or possibly higher like 5500, I think you need to have these two events playing out the budget the elections.

Q: What are your thoughts on Sesa Goa ; would you substantiate that move with the results because there was a big cramp down in terms of margins because of the export duty etc?

A: If you look at the news flow as far as Sesa Goa is concerned, I think the mining sector overall has had adverse newsflows, but specifically for Sesa Goa it's been worse. So from an investment angle, I will not touch this stock; what we are seeing is a more of a trading bounce back with the rest of the market, so just utilise it and exit as early as possible. If you are talking of the foreseeable future, that is the next three-four quarters, I don't see anything working out for this company.

Q: With respect to banks, do you think there is still lucrative opportunity or do you think because of the run up we have seen in the last 1-2 months it is pretty much miss the bus sort of situation?

A: Those who wanted to catch the bottom have missed the bus, but I suppose the rally has been overdone in the short-term. The thumbs-up which we had got for the monetary policy is a bit overdone. In fact going ahead I see some sort of correction, but surely will not take it those levels which we have seen in December. So any sort of correction from here, which could be about 5-8% or maximum 10%, should be utilized to buy again.

Q: Anything from your list of buys on infrastructure or real estate?

A: Hardly any buys in real estate, in fact most of them are sell on rally because I see the property prices coming down with sort of inventory build up which you are seeing. As far as infra buys are concerned, we have a positive on infrastructure, but with the sort of run up which we have seen of about 40-50%, I think there will be a small correction.

At the same time, there are a few stocks which still haven't moved as much. A stock like IL&FS Transportation has just started moving, and possibly we could see some further move in that. But again there are stocks where we were extremely positive, like GMR, where we have seen a rally of more than 50-60%, so there could be a small correction. I think in that correction one should again re-enter.

Q: In terms of results today, there are interesting names like BHEL . How are you expecting it to do this time?

A: BHEL should be better than what people have been expecting. If you go as far as the other capital goods names like L&T, the expectations were very low and again we were surprised there. So the way I see it is BHEL also could surprise us, I would surely be positive on this stock.

Q: What would you do with United Spirits ?

A: The Kingfisher issue is there in that group and that is going to continue for much longer. Along with that you have issues of promoter pledge as far as United Spirits is concerned, so one cannot be too enthused with the results.

The way I see it is this is only a bounce back and should be utilized to exit. I really don't see it going much beyond those Rs 700-720 levels. So that should be the top for the stock.

Q: For Ranbaxy , should a 5-6% cut be warranted for the stock given the enormity of the news?

A: Yes and I think you could see a slightly deeper cut, I would not be surprised if you see about 8-10% cut. What happens to most of the pharma stocks, including Ranbaxy, is that whenever such news flow happens you have a knee-jerk reaction which lasts for a day or two and then you see some sort of a bounce back.

Whenever there is extremely positive news, which we saw for Ranbaxy about two months back, we saw some bump up and then again it settled down. So it is more of traders stock right now than investors.