Sep 12, 2013, 10.28 AM IST | Source: CNBC-TV18

Not good time to enter mkt; avoid banks: Edelweiss

Volatility here to stay and Ambareesh Baliga suggests investors to hold some cash in their portfolio to buy at better levels, which may come up in a couple of months.

Despite the recent run up seen in Indian equities, Ambareesh Baliga of Edelweiss Financial Services feels given the level of volatility in the market, this is not a good time to invest.

"We never really expected a 600-700 points rally from those lower levels. It has caught a number of market players on the wrong foot. Because of that there was short covering, which actually added to the momentum and the momentum is still there," he told CNBC-TV18 in an interview.

He cautions that volatility here to stay and suggests investors to hold some cash in their portfolio to buy at better levels, which may come up in a couple of months.

Baliga recommends staying away from the banking sector. He says that core issues of high non-performing assets (NPAs), no credit growth etc. are not solved yet.

Also read: July IIP may decline 0.2%: CNBC-TV18 Poll

Below is the edited transcript of his interview to CNBC-TV18.

Q: Wednesday’s rally was a bit unexpected. Midday through the trade we thought of seeing bouts of profit taking; we even saw 5835. What is the sense for Thursday? Will it be difficult to hold out for yet another day for the bulls?

A: The rally in the past couple of days was quite unexpected. We never really expected a 600-700 points rally from those lower levels. It has caught a number of market players on the wrong foot. Because of that there was short covering, which actually added to the momentum. The momentum is still there.

With the way, the expectations are actually building up on the Federal Reserve policy and our own monetary policy, it can hold on for a while longer. The issue is that in case there is any sort of adverse news even the reaction could be as sharp. So we need to remember that volatility is there to stay and is not going to be a small one.

We have seen it actually taking the markets up 600-700 points in no time. At the same time, we are also seeing the way the markets have cracked in the recent past. So, you need to hold some cash in your portfolio as over the next couple of months you will get lots of opportunities to buy at much better levels than where we are right now.

Q. How are you approaching some of these banks as you get a left out feeling when you Axis Bank recovering from Rs 780 to about Rs 1000 and ICICI Bank with a similar case? Should one be putting money in or exercise caution in the banking space?

A: When there is euphoria like situation, this left out feeling is the most dangerous. It actually makes you get in into the market at more or less the highs and people have got caught in the past doing this. Just to hold back for a while as any sort of adverse news in the near future can actually crack the markets.

It doesn’t really make sense getting into the markets right now.

As far as banks are concerned, the issues are still there. NPAs are still expected to rise going ahead and unless the economy improves you don't expect the credit hike happening. So looking at both these issues I don't think it is the right time to get into banks.

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