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Jun 19, 2012, 10.54 PM IST
Given the nature of events stacked up, the Indian market is likely to extend its rally for some more time, believes Portfolio Manager PN Vijay.
It has been an action-packed week for equities with the outcome of the Greek election, the presidential elections back home, the RBI policy action and the FOMC meet. Given the nature of events stacked up, the Indian market is likely to extend its rally for some more time, believes Portfolio manager PN Vijay.
The Indian indices stabilised after Monday’s fall, and kept their heads in the green. The Nifty swung around in a range before closing just above the 5,100 mark. The Sensex gained around a percent to close at 16,860.
In Vijay’s view, the trade is very risk off at the moment, given the spiraling gold prices. “Considering the risk on into the system, the Nifty could rally up 5,200 where it has many other hurdles to cross,” Vijay asserts.
Meanwhile, Sudarshan Sukhani of s2analytics.com says, the approach is still mildly bullish. “The Nifty is holding on to 5,000. That is the support level. It was the breakout level earlier. Today is the ninth trading day, when the Nifty remained above 5,000. So, the market is factoring in all the bad news and yet is willing to stay above support. So far as that remains, the strategy is to buy intraday dips, take 30-40 points of profit,” he elaborates.
Below is the edited transcript of PN Vijay’s interview on CNBC-TV18. Also watch the accompanying videos.
Q: The clamour for a fresh round of easing from the Fed has never been noisier than it is right now. Do you think that if we get only an extension of operation twist, the market might be disappointed because that has been baked in or do you expect to see a relief?
A: If there is an extension of the twist, which is supposed to expire on June 31 and a statement from Bernanke that he is standing prepared in the case of any further deterioration in some of the data like employment and consumer confidence and home, I think that would be adequate. What is happening now is the perception that the ECB and global central banks, after the Greek crises got resolved, are prepared to take action if necessary and basically wait for the European summit to take some effective steps, Hollande is running a document for a growth compact. Probably, the Fed if it extends the twist for other three months, it would mean an injection of about USD 275 billion into the system. This would have had to go if the twist is extended and statement that it is standing by to help its friends across Atlantic that should be enough to keep the bulls happy.
Q: What kind of legs do you think this trading rally could have? We have already put behind us a 300 point rally since the start of the month, how much more could it extend itself to?
A: It could extend for some more time; we were looking at five events about six days ago. Three have gone and it is two in favour and one against. The presidential election was promising to be a very major blowout with very major repercussions for political stability that has ended very quickly. So, that’s something that’s atleast making one feel that Manmohan Singh again becomes finance minister, we could get some faster moves on reforms.
Greece was, of course, a very big plus and RBI was a disaster. So, we are back to square one, slightly up. But I personally feel QE3 and the EU summit are very important too. It would set the pace. Right now, the trade is very risk off as you see with gold going through the roof etc. Even if you get a bit of risk on into the system, the rally can go up to 5200 where I think it has many other hurdles to cross.
A: One needs to be very cautious on the midcap pharma. I think it is absolutely wrong to compare it with FMCG because there are various risks in pharma. Most of them do not have the comfort of formulations but they all have growth models, which are dependent on ANDA approvals in the US etc. So there is a big caveat that midcap pharma is more like midcap IT rather than FMCG.
Having said that, I like Glenmark because it has got a very strong balance sheet. It has got a lovely business in the sense that it’s strong in formulations also with a low-key presence, domestic formulations business in very skill based pharma products. Apart from that, its ANDA filings, its generics business is going extremely well and it keeps getting milestones. So around Rs 370 level, Glenmark is my best pick in the midcap pharma. I should add that we have it in our portfolios.
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