Where will the Nifty find a bottom?

Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

Indian stocks are taking a beating at the markets, tracking the bearish sentiment globally. On Friday, the National Stock Exchange's benchmark 50-share Nifty slipped below the 4,700 mark before managing to close at 4,718 down 126 points.

"We are seeing sovereign rating problems in European countries like Greece, Spain and Portugal," Vibhav Kapoor of IL&FS said. "There are also concerns over monetary policy tightening in US and China."

"These are issues, which will have an impact on liquidity and sentiment, if not fundamentals," he said.

Kapoor pointed out the Nifty has been in a 4,700-5,200 range since the past six months but said, now, the risk of range breakout was on the downside. "It is interesting to note the market made a top of 4,693 in June soon after the elections when the election euphoria was on. Today, we are back to roughly the same level. So in seven and a half months, net-net, nothing has happened."

Kapoor said if the Nifty were to break down, it could find a sustainable bottom at 4,200 if global sentiment continued to remain negative, though, he said, India's fundamentals continued to remain strong - "in fact, a big fall in commodities like oil would help India's fundamentals."

"I'm not sure if it will go to 4,200 but if this range - current bottom of 4,700 - breaks for two-three days, it could go down to that level over the next two-three months," he said. Midcaps, he added, would not out-perform as they tended to rise only during a strong market.

Kapoor was also not worried about the Budget and said it remains "a blip in the trend". "In that, the Budget impacts the market for three-four days and the existing trend - whatever it is, up or down - continues."

Views on stocks/sector

Metals have been hammered down in the recent correction. "One is the high-beta effect. Metals are high beta stocks that rise significantly in a surging market and if the markets fall, they sell off severely," said Deven Choksey of KR Choksey Securities. "Secondly, the strength in the US dollar is also getting investors to nervous about holding metals."

He added that metal consumption in India would continue to remain the same and that if metal stocks fell more, they could be a good buying opportunity.

Infrastructure stocks have under-performed in the recent past, not helped by Larsen & Toubro's dismal third quarter numbers.

"Infrastructure obviously still remains the story. If infrastructure is not going to be a good story in the medium and long term, India is not going to be good story," Kapoor said, fundamentals of the sector remained "as good as they have been".

"A lot of these projects both in the public and private sector - the capex cycle - will start building up in another six to nine months down the line so its definitely not a bad long term bet to buy infrastructure if you want to."

Kapoor said he was also long-term positive on NTPC, which closed its FPO at Rs 201 per share, not too cheap than the Rs 204 per share price available in secondary market.

"At the current price, NTPC is reasonably priced, neither cheap nor expensive. But if you were a long-term buyer, I don't know why you wouldn't invest in it at Rs 200."