Expert tells you what stocks to bet on in rangebound mkt

The Reserve bank of India, the US Federal Reserve and the European Central Bank had policy meets this week, and all three restrained from moving on interest rates or announcing further stimulus measures. The street was not too disappointed with this outcome from the RBI and the Fed, but the ECB’s inaction did set back global equities a notch or two.

Additionally, weak cues back home have capped gains in the market. Delayed policy action, weak investor sentiment and the deficiency in monsoon has only fuelled worries that the economic growth of the country is not going to see a speedy revival.

Moneycontrol.com got analyst Ambareesh Baliga to answer the stock queries you sent us on our Facebook page as part of KYI (Know Your Investment). Check out his comments.

Lohith Uppala: Will the Nifty touch 5,500 this month?

A: In the stock markets it’s important to have a view and a logic to support the same. But more important is to have a strategy in place in case your view goes wrong as Markets have a mind of their own and many a times in the short run no matter how well placed your logic is, the markets can surprise you.

Looking at the current scenario where the hopes of policy action has been dashed, the international worries continue and more recently the deficient monsoons will keep the cap on the markets. On the other hand we don’t expect any further nasty surprises slow down and policy inaction has already got factored in. Hence I am looking at the markets being range bound with some spikes/volatility in between.

For example we could have a strong opening on Monday based on buoyant International markets post the strong US jobs data but the question is whether it will sustain at higher levels. I am looking at Nifty between 5000 to 5200 +/- 1%. Any move beyond this without any strong data/news flows would be an aberration. Hence a move beyond 5250/5300 I would utilize to lighten my portfolio  and on the contrary below 5000 I would start adding . Hence answering your specific question I don’t’ expect 5500 this month but in case it touches those levels I would get into cash to the extent of about 30% of my portfolio.

Veena S Mehta: Which banking stock can be purchased now?

A: With no hopes of any policy action immediately, the Reserve Bank too continuing with the hawkish stand, I don’t see any reason for outperformance in the banking sector. With the expected slowdown in the economy, credit growth will take a hit and NPAs could rise. With elections approaching in 2014 or may be earlier, possibility of another loan waiver could weigh on the sector. I would suggest you to look only at well managed private sector banks such as HDFC Bank , Axis and Yes Bank . To add alpha to your sectoral exposure, you could buy DCB which could be a rising star.

Mohiddin Moodbidri: Which sectors will perform well in August series?

I don’t see any sectoral trend on the positive side in the August series. It would be a stock specific market. In terms of negative sectoral trend it could emerge in the consumer space where the valuations are extremely stretched and with the slow down especially in the non-urban areas, we could see this sector starting off a corrective move. Same would be the case with Auto and Agro related sectors.

Batul P. Kadegaonkar: How does Tata Motors look on the weekly charts and in the short-term?

A: Since I am not a technical analyst I will state my broad fundamental view. The stock has been in the downward trend ever since the monthly numbers started looking weaker than what people were attuned to in the past 18 months. The JLR numbers would take a hit going by the slowdown in Chinese economy and the Euro zone. Domestic sales too would see tepid sales in the foreseeable future which has forced Tata Motors to go in for a block closure. These issues will weigh on the stock for the next couple of months. Price action - we could see levels closer to Rs. 190-195 where you could look at buying. From a short term angle buy closer to Rs. 210/- and the upside seems limited to Rs. 230/-

Gurpreet Singh Chohan: Hindustan Unilever , Cipla or Sun Pharma , which one is the best buy at this point of time?

A: I would look at buying into Pharma which is the best defensive bet in an uncertain market scenario. Hindustan Unilever, inspite of the superb results, I am recommending investors to book out as I see the sector slowing down in the next few quarters and when that dawns on the market, the fall could be sharp. Cipla on the other hand, after a few quarters of underperformance has shown a major uptick in terms of the quarterly results. Buy this on dips to Rs. 335/- Sun Pharma is a known story but in case you would like to look at stock which could give you relatively better returns, then buy Dishman Pharma though the risk is higher.

Hemnath Goutam: Is it a good time to buy Ashok Leyland ?

A: With the slowdown in the Auto sector, especially on the HCV and LCV space, I would suggest you to avoid the sector for a while. You will get most of the stocks 10% to 20% cheaper. Look at a price of Rs. 20/- for your first lot of buying.

Mohammed Nadeem Ahmed: Can I purchase Reliance Capital at current levels for six months?

A: The financial sector overall is going through difficult times and one of the important planks for valuation of Reliance Capital was the “sum of parts” and the encashment of the same by partially selling stakes in various ventures at peak valuation. The Reliance Asset Management deal with Nippon was not at great valuations but it is helping them reduce the leverage. I don’t see much downside for Reliance Capital but the upside in the foreseeable 6-12 months is about Rs. 410/420 whereas you could look to buy at around 320/325 from a medium term perspective.

Hemanto Ghosh: Is Development Credit Bank (DCB) a good buy?

A: The bank has been churning out consistently good results after the initial turnaround. This could be a potential multibagger as well as a takeover candidate. Buy at current levels of Rs 40/41.