Mkt needs Co. results backing to sustain rally: Fortune

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Mkt needs Co. results backing to sustain rally: Fortune

Abhijit Chakraborty of Fortune Equity Brokers tells CNBC-TV18 that for the market to sustain the rally or move up further, it would require backing by corporate performance. “Here onwards, I wouldn’t ask anybody to make fresh purchases or chase the rally,” he says.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

Abhijit Chakraborty of Fortune Equity Brokers tells CNBC-TV18 that for the market to sustain the rally or move up further, it would require backing by corporate performance. "Here onwards, I wouldn't ask anybody to make fresh purchases or chase the rally," he says.

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

Q: We are passed 5,400 what are you telling your clients to take profits or do you think something has changed in the trend?

A: I think this rally has taken most people by surprise. I for sure was not expecting this kind of a huge rally to come up. On the hindsight, we can always attribute reasons to it, but having seen the kind of flows that the market has attracted recently, I don't think that there is going to be any significant reversal from now. My sense is that the market that had become a lot undervalued especially some sectors and stock-specific scenario that has got corrected now. From hereon, for the market to sustain this kind of a rally or move up from here, it would require backing by the performance by corporate results.

Corporate results in Q3 has been slightly better than what was generally estimated, so that has also helped. From here onwards, I wouldn't ask anybody to make fresh purchases or chase the rally, rather, the market is going to consolidate. Wherever sectors which are not backed by fundamental earning support or positive development on the policy front, there I would suggest some kind of a profit booking which is specially infrastructure and capital goods segment where on the ground, nothing much has changed -only some kind of a technical rally and short covering has taken the stock up by 40-60% in some cases. But in other segments whether its financials or cement or technology where there is more earning support and stability, there one could continue to hold on.

Q: What did you make of Hindalco and Tata Steel numbers?

A: We have been getting positive on the metal space about a month back, where there was some kind of upside purely based on valuation in Tata Steel, Hindalco and JSW Steel. But after the rally seen in Tata Steel and Hindalco, they are fairly priced right now. The overhang in Hindalco is basically the volume uptick which is going to come. There is some kind of a delay happening in the expansion of its brownfield and greenfield projects, which is delaying the earnings upside.

The Tata Steel numbers have been surprising, nobody was expecting anything significant to come from Corus, but this kind of pressure was also not expected. The stock is going to correct today because of dismal numbers. On the lower side, I would be looking to make purchases on Tata Steel because in Q4 there is going to be improvement on the margin side both locally as well as at Corus level. This is because of the raw material prices trending down. There is some kind of an uptick seen in finished steel prices. So after after yesterday's numbers, there could be a buying opportunity once again in Tata Steel.

Q: What is to your mind the extent of the left out feeling in the market? To that extent where do you see the downside supported now in case of any kind of pullback or correction?

A: As the development in Greece is very positive for the market, the last six week rally is going to be completely liquidity driven. That can get a further boost with some kind of resolution now emerging out of Greece. Can we move to 5,600-5,650 or 5,700? It is definitely possible because at every level we thought that this is enough and market should not consolidate or correct and it kept on going up. I don't see any significant incidence coming up which can derail this market and bring it down 400-500 points on the Nifty.

I do not see that, maybe we are going to see a consolidation or one-two days of 100 points of correction on the Nifty, but it is more of a consolidation phase once this momentum starts to sag. The election results and the Budget are still some time away, so between now and beginning of March there is no significant incident which can reverse the rally. I would expect the market to go to 5,600-5,700 because of Greece development. At the consolidation phase, it can touch back to 5,300 or 5,250 in the worse case scenario.