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Nifty to see high of 4,500 before Budget: Amit Nalin Sec

Published on Tue, Jun 30, 2009 at 11:25 | Source : CNBC-TV18

Updated at Tue, Jun 30, 2009 at 15:35

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Amit Dalal of Amit Nalin Securities believes markets would see an upside today on the back of positive global cues. "There has been resurgence in the market from the low of 4,200." He feels 4,500 will be the high that the market would see before the Budget. "There maybe some sell-off there. The 4200-4500 range will remain sacrosanct until the Budget news is out."

Also Read: See mkts consolidating next quarter: DSP Merrill Lynch

Here is a verbatim transcript of the exclusive interview with Amit Dalal on CNBC-TV18. Also watch the accompanying video.

Q: Is that a pre-Budget rally or the market goes sideways before the Budget you think?

A: I think we are definitely going to get an upside today because of global cues. The US markets have done well. Oil is doing well. I think there has been resurgence in the market from the low that we saw at 4,200. Not only in the ones which moved up in the first part of the rally like realty or oil space, now we have banks participating, so there is a wider participation. The market has some more upside left. I continue to believe that 4550 will be perhaps the high which we will see before the Budget and maybe there will be some sell-off there and the 4200-4500 range will remain sacrosanct until the Budget news is out.

Q: You have been quite cautious on real estate as a space. What have you made of all these qualified institutional placements (QIPs) that have got done, and successfully, it seems?

A: I think I have been cautious but I felt that the real time to buy could be when real estate prices fell and that came in around March-April. That is when we saw the bottom of the real estate stocks. Thereafter it has been three things-volumes have gone up, there has been a resurgence of the developers wanting to change their balance sheets and increasing interest from investors.

Put together, I think, they now have a model pick. Unitech, for instance, wherein debt is coming down and they are re-changing their products, which more suited the Indian market-I think that will play out over a period of time. Definitely it is not going to be a high income delta which will come in next year for most of these people because they still have a long way to go but yes, the correction process has started.

Q: You track sugar as well-that's been a space on fire. You think by way of stock appreciation there could be more?

A: Yes. I think there has been a complete change in the economics of most manufacturers. From Rs 3-4 per kilo gross margin between S&P or the sugarcane price and realisation prices is almost Rs 7 per kilos for sugarcane manufacturers. The diversified product line of power, distilleries etc will get a great boost to the earnings. There is a rumour or possibility that the price at which they are selling power will also be re-negotiated upwards. Right now it is only perhaps Rs 3 for a stock like Balrampur . So these upsides are going to come into the price and I think they will perhaps make profits, which may even exceed the profits of what we have seen in the past.

Q: What about GMR ? It appears that they will successfully do their QIPs, the stock has run up yesterday. How do you look at that stock?

A: In terms of pure valuations, we all know it is extremely expensive. But it is a great promise of India's infrastructure development. There is a definite business plan, which obviously QIP investors have done due diligence and will see the execution of thereof. So, it is a stock which will always remain in the limelight because it is purely a great surrogate to India's development plan. But it is an expensive stock.

Q: Any thoughts on United Spirits ?

A: I think everybody understands the potential of the underlying product of United Spirits and that is not something that one can argue with. But this has been going on for a long time now. It has hurt the valuations and will continue to keep a burden on the valuations until the full strategy of lowering the leverage and the divestment process is over. After that whether it has been done at levels, which allow the company to show you high return on investments (ROEs) or higher returns on the new capital that has come in. It is a question that only time will allow us to answer. I just hope that they finish the process fast.

Q: Would you buy Tata Motors now?

A: Yes, they do have a problem in terms of their balance sheet. However, I think, the investors who have bought into Tata Motors in the last two months say for the price of Rs 150 onwards, I think the call here is similar to the call which was there in 2002-2003. At that time, if you ask me, the situation for Tata Motors was even more difficult because we could not really forecast the growth of the country. The growth of the country came and that really changed the parameters for Tata Motors. Here, we now already see a potential for the growth for the country and therefore the downturn which has taken place in CVs is now definitely on improvement basis. Yes, JLR and its debt remains an issue. But, in terms of the fact that this company has such a robust size, it has good products. It will always attract investors at lower levels.

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