Jan 21, 2013, 10.48 PM IST | Source: CNBC-TV18

Mkt in consolidation mode; L&T is good buy: Baliga

Independent analyst Ambareesh Baliga explains to CNBC-TV18 that the market is undergoing a trend of consolidation and adds that it is better for the market to take small steps upward rather than surging upward and correcting sharply. Baliga picks L&T as his stock of choice and expects the stock to touch levels of Rs 1,750-1,800

Independent analyst Ambareesh Baliga explains to CNBC-TV18 that the market is undergoing a trend of consolidation and adds that it is better for the market to take small steps upward rather than surging upward and correcting sharply. Baliga picks L&T as his stock of choice and expects the stock to touch levels of Rs 1,750-1,800 over the next month-and-a-half-or two months.

Technical expert Sudarshan Sukhani of s2analytics.com adds that there is no need for worry with another day of the broader market failing to keep in pace with the Nifty. Sukhani estimates that the market is now peaking out in the short-term. "To that extent, the Nifty is now on the verge of what according to technical indicators and analysis is called 'overbought' and will chop around till it relieves itself of that overbought position. So the prospects of another rally from here are very dim until the market either consolidates or corrects. I think this is not a good time to buy."

Below is an edited transcript of Ambareesh Baliga's analysis on CNBC-TV18

Q: On an intraday basis, the Nifty has made two attempts towards 6,100 and on facing some resistance at these higher levels, it has retraced a bit. What is the call on the markets now?

A: My call is still quite bullish, but there is a trend of consolidation at work. The market consolidated at 5,600-5,800 and again then closer to 6000. Clearly the flow for the market is at 6,000. I don't see the market going below that and my immediate price target is 6,150-6,200. So it is better that the market takes small baby steps than moving up sharply and then correcting steeply.

Q: How much more floor would you give Reliance Industries after what you have seen today?

A: For Reliance , the floor is clearly Rs 900. I don't see Reliance breaking that and possibly over the next couple of weeks I expect the stock to touch levels of about Rs 970-980.

Q: Infosys threw up a positive surprise with its earnings. Is there a case for upgrades in earnings in this fiscal or the next?

A: Absolutely. Looking at the sort of results for this quarter clearly there would be some upgrades based on which the overall market might move to much higher levels. So I feel that over the next few weeks, a lot of analysts actually will issue upgrades overall.

Q: How would you approach L&T now? Would you buy it at these levels? In light of all the positive surprises from vulnerable companies - do you expect any surprises from L&T?

A: Last quarter too, L&T surprised to a certain extent on the positive side. I expect something similar this time around and for the March quarter. So overall, I am quite positive on L&T. I expect the stock to touch levels of Rs 1,750-1,800 possibly in the next month-and-a-half-to- two months. At the current levels, investors should buy the stock.

Q: Prima facie, NTPC 's results were in line with expectations but that stock is down about 2 percent. How do you read this?

A: It was slightly better than expectations. It has moved again recently from the Rs 151-152 levels to Rs 165 after the correction. I think investors should aim at buying the stock closer to Rs 156-157.

Q: How would you approach the market? Would you invest fresh finds into the market at this 20,100-level or do you think most of the positive triggers have already played out and fatigue could perhaps return?

A: No I don’t think there would be any fatigue as the market is consolidating. So investors who have missed out on the move in the last 12 months should invest at the current juncture as any possible the downside may be about a maximum of 40-70 points. I really don't see the markets breaking 6,000. So even at these levels people should look at the upside which could be possibly 7-8 percent as the downside is negligible.

Q: Would you recommend profit-taking in oil and gas stocks like Oil and Natural Gas Corporation ( ONGC ) or Gas Authority of India ( GAIL )?

A: Investors could indulge in some profit-taking to a certain extent after the 30-percent move posted by the market over the last 3 or 4 weeks. It is prudent to book-out to a certain extent. But investors should plan on buying back on a correction of 8-10 percent. I really don’t think there will be a correction beyond that.

Q: Jet Airways and SpiceJet are neck-and-neck in terms of price performance as well as earnings. Which one would you pick?

A: Fundamentally, neither. Although SpiceJet has recorded extremely good profits, the outlook on the company is dim as the start of the fare wars has begun to coincide with oil prices trending upwards toward the US 100-level over the last three-to-four weeks.

However both SpiceJet and Jet Airways could see an upside in news of increased investor interest. SpiceJet, could move to levels of Rs 52-55 while Jet Airways could touch levels of Rs 650-675.

Q: What could be the next domestic trigger to take the markets out of the current range and what kind of upside target are you looking at not, just by the end of this series, but at the start of a new one?

A: Strong corporate results hold the potential as a strong domestic trigger. Another strong contender is the expected cut in rates, by atleast 25 bps if not 50.

Q: A lot of major earnings are still left later in the week. Would you play or buy any of them ahead of their earnings or in anticipation of good earnings?

A: I am bullish on the capital goods segment and my pick from the segment is Larsen & Toubro (L&T). Other picks would be chiefly from the banking segment which I expect to post a decent upside over the next one or two weeks.

Q: Can you recommend anything in the power segment?

A: There is nothing much in the power segment except NTPC. Investors should look at slightly lower levels, closer to Rs 156-157, to buy the stock as I expect the stock to touch Rs 220-230 over the next year or year-and-a-half.

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