Experts remain cautious despite party on D-Street

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Just as the street became comfortable with the prospect of a correction, the market decided to shock everyone and make a dash to close at its three and a half month high. The Sensex started the day on a good note, crossing the 18,000 level for the first time since August 2011. The Nifty soon followed by surging past 5500 in midday trade to close at 5531.

According to Mehraboon Irani, principal and head of the private client group business at Nirmal Bang Securities, this bull run in the market is due to the constant flow of liquidity. "The fundamentals are still lagging though, so I am a little skeptical," he said. His advice is to identify the underperformers and enjoy the party as long as it lasts.

Sudarshan Sukhani of s2analystics.com agrees with Irani, and says that it is time to book profits. "It is quite likely that the Nifty will go up another 30 points or 50 points, but the rush with which we have risen tells us that this is where we should get out while the going is good," he said.

Below is an edited transcript of the interview. Also watch the accompanying video.

Q: What would your call be on some of these infrastructure names that have moved so well? Do you think there is still a potential to buy any of the stocks and if yes which ones would you pick?

Irani: BHEL would be a value play according to me with limited downside, but Larsen and Toubro has gone up a little bit too sharply. As regards to others, I think they have fallen too sharply and they have bounced back. It's a given rule in this market that whatever goes down too sharply, when the bounce happens they will also look very sharp, so it is that way.

As far as infrastructure goes, I think there is a long way to go because all will depend on the government finances and how the finance minister addresses the issue in the Budget. As regards to the financials of most of the names, especially the midcaps in this particular space, I think its going to be a long haul for them to improve the financials.

Q: Is the bear market over and are we in a bull market now?

Irani: Honestly no. I think the market is driven by liquidity and that fundamentals are still lagging far behind. What has happened is the market has become very optimistic of the fact that the fundamentals will catch up. The proof of the pudding lies in the fact that for the fundamentals to catch up, the government will have to do a whole lot of things.

The divestment announcement today of ONGC is just a drop in the ocean. I think the government has to take very tough measures and that is possibly something to do with subsidies. Can the government afford to do that? I think the answer is that politically it's not a correct move to do. Will the market like it? Possibly. But the market willed finitely not like an increase in service tax. So I think ultimately the market will find an excuse for it to come down.

The market can probably go up another 100-200 points up from here, but I think fundamentals are lagging far too behind and I am honestly a little bit too skeptical. I think as long as the music is on, enjoy the party because one really doesn't know as to when this is going to halt. The market has gone up by 3,000 points on the Sensex and 1,000 points on the Nifty and it can't continue like that forever.

Q: Reliance has been the sticky stock today, down about 1.5%. What are your thoughts on that one and the price trajectory it could see from here?

Irani: I think the gas output numbers which came yesterday were a disappointment and I personally feel that this market is all of opportunities here and there and as long as the momentum is on I think people need to identify the underperformers. So for all you know, one day an HUL will do well, one day Reliance will do well.

So I think as a trading strategy one needs to identify the underperformers and play this party right up, participate in this party right now. A whole lot of stocks have moved up too sharply but there are still some underperformers like Reliance or may be HUL right now over the last few days. So for all you know one fine day this stock will also make the move and take the indices up further. So I think at the present level I would like to be positive on Reliance rather than be negative.

Q: Things are moving rather fast. All targets are coming within 48 hours and your target yesterday probably will come either this afternoon or tomorrow. Are you in profit-taking mode or you are just revising your targets upwards?

Sukhani: I am in a profit-taking mode. I have closed almost all my Nifty positions. It is quite likely that the Nifty will go up another 30 points or 50 points, but the rush with which we have meet these levels tells us that we should get out while the going is good.