SENSEX NIFTY
Feb 22, 2012, 04.33 PM IST | Source: CNBC-TV18

Time to take profits off the table: Quantum's Sanjay Dutt

Sanjay Dutt, director, Quantum Securities believes the risk reward ratio is not favourable right for investing in markets right now.

Immense fund flow clubbed with retail participation helped the Nifty to move above 5600, hinting that the market is entering another bull phase. However, market veteran Sanjay Dutt, director of Quantum Securities believes the risk-reward ratio is not favourable for investing in markets right now. He feels the market is likely to see 5% downside from current levels after the recent sharp upmove.

Global markets have remained mostly supportive as far as a deal between the Greek political class and the international lenders is concerned. The positive newsflow from Europe has been already priced in, Dutt says.

"I would recommend that no long positions be taken, and if you have profits and if you are sitting on reasonably large long positions, itís time to take them off the table," he told CNBC-TV18.

The next major trigger for the market is the Union Budget, which will be tabled on March 16. According to Dutt, the Budget will determine market movement hereon. He expects policy action in Budget followed by Reserve Bank action.

Below is an edited transcript of Duttís interview on CNBC-TV18. Also watch the attached video.

Q: We speak in a very different environment for the market: 5600 for the Nifty. Are you getting cautious over here or is it looking different this time?

A: Absolutely. I am cautious for the next few weeks ahead. I would recommend that no long positions be taken and if you have profits and if you are sitting on reasonably large long positions, itís time to take them off the table.

The next two-three weeks are going to be pretty choppy with uncertainty with regard to oil and of course domestic political uncertainty, in terms of once the results start flowing in from key State elections. We have already run up quite a bit, therefore, we are pregnant for a correction. A combination of these factors make me little cautious.

The risk reward doesnít look favorable right now. I donít see another 200 points upside from the current levels. Yes, if itís there, Iíll prefer missing it because I have ridden the 900 points that has already passed in the last few weeks.

Also read: Time of basket buying over; be stock specific: PN Vijay

Below is an edited transcript of the interview. Also watch the accompanying video.

Q: It is a very different environment for the market, 5600 for the Nifty. Are you getting cautious over here or is it looking different this time?

A: Absolutely for the immediate short term the next few weeks ahead, I am cautious. I would recommend that no long positions be taken. If you have profits and if you are sitting on reasonably large and long positions, it is time to take them off the table.

I think the next 2-3 weeks are going to be choppy with uncertainty pertaining with regard to oil. Of course domestic political uncertainty in terms of once the results start flowing in from key state elections and then we have already run up quite a bit so therefore we are pregnant for a correction. So a combination of these factors make me little cautious.

The risk reward does not look favourable right now. I do not see another 200 points upside from the current levels. Yes if it is there, I will prefer missing it because I have ridden the 900 points that has already passed in the last few weeks.
 
Q: How much downside do you foresee because the market has been quite stubborn about holding its levels this time?

A: Not much. My point here is that I am not saying that we initiate short position; I am not saying that we will fall off the cliff and be back at 5100 or 5200. All I am saying is that we are ripe for a retracement and a consolidation period. Risk reward in taking fresh longs is not favourable at this point of time. So need to be a little more specific at how much downside.

My estimates would be about 5% from the current levels one could easily get. But it would be more of a rotational correction. At the same time some of the stocks which havenít gone up but are fundamentally good and run B group counters in the BSE 500 and 200 they would now start moving up.
 
Q: We are getting into an important month for the market, very news heavy. Which of the events do you think will be a market-making event in the sense that it can make or break the trajectory for us? Will it be the budget or what the RBI decides to do or will it be a dark horse like the election outcome?

A: In the order of priority, it would be the budget first because thatís the key document thatís being anticipated by the market because of the policy action that may contain. The budget is not just an annual balance sheet exercise for the government but it is always used as a platform to make key policy announcements. So therefore, the political calendar will get quite clear since the elections are before the budget . One expects very aggressive policy action to come in there or at least some policy action to start to kick in.

Followed by the RBI action. We have already had some clear sound bites coming in from the RBI that they are concerned about liquidity. They would address that but more than that the bank rate is what is being looked at whether they go in for a 25 bps cut this time or not and I think elections are not going to be that much of an issue. If there is a upheaval or it is an absolutely unanticipated kind of result that comes out and it throws up some odd political equation in the centre and creates more political uncertainties then it may have a bearing. But in order of priority I am quite clear it's the budget, then the RBI and then the elections that are going to play out in the first fortnight of March.

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