Mkt to move to 5800 post small consolidation: Nirmal Bang

Q: How would you approach some of these ADAG names like Reliance Communication that is sitting at 52-week lows? Is this a good shorting idea for a trader?

A: Very difficult to state. Yesterday I was actually looking at the way some of these front-line names have performed from the 2008 highs and the stock which was quoting at Rs 700-800 now quoting at Rs 55. I am trying to think that the only way this stock has to go is go up. One can’t come to such a conclusion.

Whether one should go short at Rs 55? I feel very sad to say that one can definitely contemplate doing that because since you mentioned Reliance Communication, I think the problems which the sector is facing as far as the regulator’s inaction goes and the question mark as to what is ultimately going to happen to the 2G spectrum auction and Reliance Infotel’s entry over the next 12 months, I think it’s honestly a very difficult call.

So, Rs 55-53, does it offer value or was it the time to exit giving up? I think a little too late honestly as far Reliance Communication goes. As far as other sectors in the ADAG Group go, I think the only company which I personally am looking at a little bit positively is Reliance Infrastructure .

Q: You track sugar as well. Are you upbeat or would you take profits here?

A: Balrampur Chini is my top pick for the buying side. But yes, I do accept the fact that among the front-lines while Balrampur Chini stands out because it has got a better balance sheet as compared to Bajaj Hindusthan and Renuka Sugar and also because it is UP based whereas Renuka Sugar which is not UP based. I bid for UP based companies. I feel that the sugar output this year is going to come down. It may not be the great days what we saw three-four years ago for this industry.

I am not saying it’s going to be a complete revival as far as the fortune of this industry goes, but there is going to be better tiding. I think the figures are going to be much better. The production is going to come down much more than what people had envisaged maybe three-four months ago because of the poor monsoon in some of the states. But having said that the fact is yes, the stock has gone up a little bit sharply, not disputing.

But ultimately, I personally feel that whatever we are seeing as far as the movement in the scrip of Balrampur Chini and some of the other sugar scrips go I think the market is yet to participate. I think it’s more of the people who really understand the industry trend who are possibly buying into the stock, what people say insider trading.

So, I would say Balrampur Chini, if it corrects, considering its gone up a little bit too sharply and it comes down to maybe Rs 62-63 level, I think a fresh look at this particular stock can be seen. Ultimately, I see the stock possibly going up over the next one-two quarters to a price of around Rs 75.

Q: What are you telling your clients to do on these defensives like FMCG and pharma, which have been the biggest outperformers?

A: I think slight profit booking and then we will board into the high-beta stocks considering the fact that we have been positive on the market. But looking at the levels at which we are right now, and the market is already on 10%, the factors are slightly tucked towards defensives.

It’s easy to say that most of these defensives, especially the ones in consumer staples, are expensive in terms of valuation. But the fact is it’s a call which one is making. I am expecting the market to move up despite a small correction here and there. But what happens if there is a problem at New Delhi? What happens if the ECB doesn’t end up doing what it said it will do? There are uncertainties still at the floor. So if is there a negative outcome somewhere in Berlin or if there is a problem at New Delhi and the market falls, I think it’s the defensives which are going to save the day for investors.

So it’s honestly not very easy to get out of defensives or to reduce your exposure beyond a particular extent, despite the fact that they maybe a little bit expensive. The way the high-beta stocks have gone up, possibly they could come down also if things don’t happen the way we are expecting right now.