May 24, 2012, 10.12 AM IST
The oil companies announced a steep hike in petrol prices yesterday. In an interview to CNBC-TV18, Ambareesh Baliga, COO of Way2Wealth says, the market will take it positively.
The oil companies announced a steep hike in petrol prices yesterday. The prices have been hiked by Rs 6.28 exclusive of taxes in Delhi, this would translate to a hike of Rs 7.50. The hike is effective from today. The E-GoM could meet on Friday to discuss hiking diesel & LPG prices.
In an interview to CNBC-TV18, Ambareesh Baliga, COO of Way2Wealth says, the market will take it positively. “The rupee will get the signal to recover from the levels it had fallen to yesterday. So, overall, it should be positive,” he adds.
Hopefully, he says, diesel should come tomorrow or day after.
Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying video.
Q: What kind of reaction do you see from the market on the petrol news?
A: This is the first in that long list of bold and tough measures. I suppose the market will take it positively. Moreso the rupee will get the signal to atleast recover from the levels it had fallen to yesterday. So, overall, it should be positive. I just hope this is the first in those tough measures which the government will take going ahead. Hopefully, diesel should come tomorrow or day after.
Q: Are you asking your clients to buy any of the company from the oil space or asking them to sell anything in autos?
A: We were negative for quite a while in autos. When extremely good numbers were coming in January-February-March we were saying that it may not last. When the going is good, one should be exiting both Maruti and Tata Motors. That was right. But it’s still time to wait for a while, let them bottom out. I think in Maruti one could see another Rs 50-60 cut from here, especially today after the petrol hike.
We expect Tata Motors ’ numbers to continue to be weak for a while. So, possibly one could see levels of Rs 230-240. So, I suppose its still time to wait.
A: We have been quite negative on IT. Inspite of the rupee depreciation, we have not seen too much of view in this sector. Going ahead, we are seeing those billing pressures coming in. So, even at these levels, we are not suggesting people to buy.
Q: How much of a bounce are you seeing in oil marketing companies? Would you own them now or would you take profits on the bounce?
A: I think one should take profits on the bounce because of this hike and expected diesel hike, one could see 4-5% bounce. People should utilise that because fundamentally nothing much is going to change for these companies, as long as the subsidy thing is there. The real valuation of these companies will never come out. So, utilise the bounce and exit.
Q: Are you expecting a big reaction in either the rupee or the stock market?
A: I was expecting the rupee to recover 40-50 paise, but instead it’s still moving up. It’s 56.17-56.18 right now. I do not think this is good news. Our expectations that the market will recovery by 30-40 points, which the SGX Nifty has been showing, I doubt whether that will sustain.
Q: Your expectation of the rupee is based on what might happen in diesel tomorrow because petrol prices do not affect the deficit.
A: Yes, absolutely; Atleast the government has made a bold move. We are expecting more bold moves going ahead. Next would be diesel. Possibly going ahead in the next couple of weeks, we should hear on FDI in aviation, post June something, in retail. So, with these series of expectations, that should be a positive thing for the international community.
Because of these series of news, if the rupee recovers to levels of 53-54, automatically you will have more institutional investment coming in. The valuations are attractive, but we are not seeing investments basically because of the rupee depreciation.
Markets face resistance; Nifty likely to correct soon
After expansion comes contraction - this is the theme which the stock markets have begun to work on. This letter has been upbeat on the market. We still are, when it comes to the long term. The short term scenario may be different. For short term traders the strategy should be to take swing trades lasting one or two days, only on extremes.
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