Market may end current series around 5300-5400: Baliga

In an interview to CNBC-TV18, Baliga says that the market has been making higher bottoms with every passing rally, and therefore more upside is expected. “As of now I think the downside is limited to 5000-5050,” he added.

Talking about individual stocks and sectors, Baliga says that he is not positive on the cement sector, and not only because of the pending CCI decision. “We don’t see demand picking up at least for the next couple of months and as against that we have seen most of the stocks really rallying in the past couple of weeks close to their highs, so at this point of time, I think the risk-reward ratio is not really favorable,” he said.

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

Q: What’s your sense of how this series may finally close up for the market?

A: I think clearly the market had been taking all the adverse news in its stride, and whenever we see some sort of positive news we are seeing a decent rally. So my feeling is that more or less we have made a bottom and with every passing series we are making a higher bottom.

As of now I think the downside is limited to 5000-5050, and like I said last time, I will not be surprised if we see 5300-5400.

Q: We will probably hear from the CCI on the cement companies today, but the cement stocks did not fall too much yesterday on expectation. What are you telling your clients to do there?

A: We are asking our clients to exit because clearly the sword is dangling. At the same time, if you look at the ground reality, we don’t see demand picking up at least for the next couple of months. As against that, we have seen most of the stocks really rallying in the past couple of weeks close to their highs.

So at this point of time, I think the risk-reward ratio is not really favorable. Like I said, looking at this dangling sword it doesn’t really make sense holding on at these levels.

Q: The big rally has come through on some oil names. How are you approaching that whole pocket now and what would your bias still?

A: I don’t see a huge rally out here because I think over the next couple of weeks we would again have a petrol price cut looking at the way the oil prices are. So I don’t think this rally can continue for too long. You should just be playing for that as a 4-5% sort of a move.

Q: We had a big relief rally in Educomp yesterday. Would you buy it now on the back of the FCCB relief which seems to be coming?

A: Yes, clearly that FCCB was one of the major issues as far as Educomp is concerned, other than the other balance sheet issues. So at least this has been sorted out to a certain extent. So this rally I think was overdue. In fact, in the last two months we have seen this stock correcting from close to Rs 190-200 to Rs 130.

But at the same time, unless of course the environment improves, don’t expect a bounce back beyond Rs 200. So I think this rally can continue to levels of about Rs 170-175. Going beyond that really requires some good news from Educomp.

Q: Any issues cropping up in the Sesa Goa - Sterlite merger, because there has been some talk around the AGMs of these companies and stocks have become very volatile there for the last two days?

A: Clearly there has been a lot of opposition to this. The question is whether it finally goes through or whether it’s called off. Looking at all these uncertainties and looking at the way the management has been treating the investors for the last decade, clearly this is not an investment grade stock as far as we are concerned. We basically play in this from a trading point of view.

Q: There have been some unconfirmed reports about import duty on power equipment. Do you think it’s prudent to take that plunge on BHEL , Larsen etc. now because the last time the market did that it was disappointed?

A: Yes it makes sense to look at the price points for stocks like BHEL or L&T. With the sort of correction we have seen in these past so many months, valuation-wise they look extremely attractive, especially BHEL. We clearly don’t see it below Rs 203-205 mark whereas the upside right now could be about Rs 252-260.