Market to trade in 5200-5600 range till March: Dipan Mehta

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The market is trading very close to its top and will now be range based till the next set of events in March, says Dipan Mehta, member of NSE and BSE. "You would see the market trading in a band of between 300-400 points, with 5600 being the top and 5200 being the bottom," he said, adding that investors should not get cautious.

The UP elections, Budget and the RBI policy are going to be the next set of events that will affect markets, and Mehta says that these will decide if the Nifty falls to below 5000 or jumps to its highs.

Below is an edited transcript of his interview with Latha Venkatesh and Reema Tendulkar. Also watch the accompanying video.

Q: Do you get the sense that we still have an upside, this is just consolidation or do you recommend some profit booking after the kind of run up that we have seen?

A: Immediate short term seems bit difficult to call but my sense is that we are very close to the top and we don't see the market trading for an extended period of time beyond 5600 on the Nifty. So my sense is that investors should get cautious. You would see the market trading in a band of between 300-400 points, with 5600 being the top and 5200 being the bottom.

We have got major events coming up middle of March, starting with UP elections, the Budget and the RBI policy. How those events actually unfold will decide the way forward for the market - whether they will be able to scale to the earlier highs of beyond 6000 or then again go back below the 5000 Nifty levels.

So over the next few trading sessions we do expect some sort of size ways movement and then a decisive move would take place once we have some uncertainty out of the way.

Q: In the power sector, any there any names you will stay with? If you had got them at the right time, some would have given you 50-70% gains in relatively 6-8 weeks.

A: From a trader point of view, one could look at some more upside in these stocks, but from investor point of view how can you justify buying these shares considering their business model, the past track record and also the fact that they will keep on diluting their equity on a continuous basis as and when the stock prices move up and they have an opportunity. So I doubt whether they will be able to create long term value for minority shareholders.

So from an investor point of view, I would look at exiting at every rise. But from trader point of view, these have got into a new momentum and if you are swift and able to cut the losses then these may still offer a bit of an upside.

These businesses have got high degree of uncertainty and although the government may talk about giving coal supply and all that, which is a trigger for these stocks, one has to actually see some action at the ground level. With the delays that have taken place and the interest rates prevailing at this point of time, one needs to look at the viability of various power projects under implementation or just about to be commissioned. So there is a great deal of uncertainty which I'd like to avoid and in a market like this there are so many other great opportunities which investor could look at.

Q: What is your comment on Marico itself, if you have one, if you are tracking that stock and broadly that space?

A: The valuations are on the higher side for Marico and other FMCG companies. No doubt this acquisition also will be priced quite stiff and one really wonders whether they will get the right return on investment in this acquisition which they have made.

So my sense is that Marico and other FMCG stocks and some of the defensive stocks need to be avoided at this point of time. There is hardly any scope for PE re-rating over there and the earnings we all know are typically in the 15-16% kind of range.

Whatever the next two or three years earnings are seem to have got priced in, there's good visibility, less uncertainty which is reflected in the high PE multiple, so that's also as a segment we like to avoid. Look for some of the more cyclical business which could give decent returns over the next few months.

Q: After today's 5.5 % cut, how would you approach Coal India?

A: Generally we are not very positive on public sector undertakings. There is far too much government interference, so the interest of the minority share holders is always sacrificed. We have all seen that in the oil PSU's also and I don't think Coal India is going to be anything different.

There is not much of freedom in terms of pricing. Just a few months ago they were asked to reverse their earlier pricing policy and now also the way it is been directed to supply coal or sign penalty agreements , all just kind of suggest that there is far too much interference and that's not right stock for investors to be in.

No doubt results have been fantastic and it's a company with great potential, but I am not very sure whether its potential will be unlocked and they will be able to price coal at market prices and consistently deliver higher bottom line and top line. So I would like to avoid even Coal India at this point of time.