Mkt tough to predict, focus on individual stocks: Experts

"A much more reliable sign will come if the Nifty crosses that hump of 5730-5740. So some positions could be taken on the long side, if this current trend persists," he added.

Meanwhile, Raamdeo Agrawal, director and co-founder, Motilal Oswal Financial Services (MOFS) explains that the market is tough to predict and that investors should focus on the earnings profile of individual companies.

Below is an edited transcript of  Raamdeo Agrawal's analysis on CNBC-TV18.

Q: What has been the experience in October so far? Has the pick-up that you alluded to in September followed through in October?

A: The first three weeks were pretty good with a few withdrawal symptoms in the last week. But then these things keep happening. Overall, I think October is still good.

Q: Have you seen any pick-up in retail participation in this rally or is it still one filled with the mood of skepticism with few entries into the market as evinced by the global investors?

A: The last one month has been distinctly better for retail investing and cash volumes came down to as low as 7 percent of the market. At the peak, it went up to as high as 30 percent and came down to 7 percent till the first week of September. It picked-up to as high as 14 percent and right now it is about 11-12 percent So, clearly the participation is somewhat better. There is some fizz in some of the midcap stocks and that is contributing to the slightly better participation currently in the market-place from retail.

Q: So since you are seeing better participation and cash volumes have picked up as well. Beyond the 5,700-level ,what are the sectors that you recommend investments into?

A: Investors can look at all the private sector banks and some of the consumer stocks. Now even cement and media stocks are doing very well. We have been recommending Zee . So, I think it’s a mix consumer-oriented companies that have seen doing well in the last two-to-three years. Sectors as a whole are not doing well, though individual companies are posting positive performance.

So, investors have to pick companies which are doing well, where the earnings visibility is better and corporate governance is not so much in question. I think those are the companies where investment is flowing into.

Q: What's your sense about the market now? Do you think it has passed through the worst?

A: The market is very difficult to predict. But as far as the earnings are concerned, this quarter is going to be very flattish and aggregate Sensex earnings are going to grow at about two-to-three percent. So, there is not much of excitement on the earnings side not only in this quarter but in the next two-to-three quarters there is no lever which can change the earnings profile.

As far as liquidity is concerned, I think global liquidity has been immense and has been surprisingly very strong. Seven-to-eight months ago the estimate that the market would receive USD 14-15 billion in the first nine months, was impossible. But that has been the biggest surprise and what is even more surprising is the withdrawal of Rs 40,000-Rs 45,000 crore worth of equity from the domestic market despite the market having done so well.

I think the market is the best-performing asset class today, offering a 25-percent return from January till date and yet seeing Rs 45,000 crore in redemption. So, I think there are so many surprises from investor- and market- behaviour. The only factor you can estimate is a specific company’s earnings.

Q: What are your thoughts on the telecom sector and the regulatory problems that have plagued the sector? In an important meeting scheduled for today, spectrum refarming will be put on board as well and this could really have a negative impact on many of the telecoms. How would you approach stocks like Bharti ?

A: With the kind of changes being made in the rules in the domestic telecom sector, it is almost impossible to figure out what the final rule is going to be. You cannot take a view unless some clarity emerges on a various issues. We have stayed away from the telecom sector as it is very difficult to figure out what will happen to the earnings profile of these companies in next 12 to 18 months. Only after 16-18 months can one finally say whether it is the right time to invest or not. Right now, there is lot of confusion.