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4500 good support level for Nifty: Dipan Mehta

Published on Fri, Nov 20, 2009 at 14:24 | Source : CNBC-TV18

Updated at Fri, Nov 20, 2009 at 17:02

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In an exclusive interview with Dipan Mehta, Member of BSE and NSE, spoke on his reading of the market and outlook.

Below is a verbatim transcript of the exclusive interview with Dipan Mehta on CNBC-TV18. Also watch the accompanying video.

Q: What's your sense of the market now because we have spent few days above 5,000 and now the markets appeared a bit sluggish over the last couple of days? What is your sense between now and the end of the year?

A: The market remains range bound and we are not seeing any blow-out rally nor are we seeing any breakdown and my sense is that 4,500 is a good support level. Around 5,200 is going to be quite a resistance; so that is a kind of a trading range. It is on the high side but a more narrower trading range would be between 4,800 and 5,100 and there is hardly any new flow or any domestic triggers for our markets to outperform or underperform and given that scenario we are moving more or less in complete sync with the global markets which in-turn are moving in complete sync with the US markets.

So in the absence of any special news or any domestic factors or issues, we are moving more or less inline with global markets and that trend will remain at least until the first or second week of next year and then the earning season will kick in for us and that perhaps could make a difference. It could act as a trigger, hopefully, for some kind of a breakout on the upside. At the same time, an eye needs to be kept on the government and as and when the opportunity does arise. We are seeing that the central government is taking several steps to reform--small baby steps here and there but they all add-up together and create a feel good factor. So that could be one thing that we are watching out for maybe prices of petro products increased or disinvestment programme takes off in true earnest. These are the things which will interest a lot of foreign institutional investors (FII) and then you could see further upsurge of FII flows and that perhaps could be a trigger maybe around the end of this year or early next year.

Q: Cox and Kings' initial public offering (IPO) will end today. Have you had a chance to look at that IPO, does it interest you?

A: It's a good quality company and what was indeed quite surprising was the track record in a rather tough environment. It is trying to diversify its revenue stream which is also quite positive but I think it's fairly priced. You could get a slight bump up on listing but this is a good company to track and maybe if it's available at a reasonable valuations around that 18-21 times or so then it would make sense to buy at that point of time. However, it's a good company to get listed and offers a very special exposure to an industry where growth rates are pretty good.

Q: Any thoughts on TV today?

A: There was a deal which Network18 did with the Korean company and then we heard the deal about NDTV also. Strategic investors are prepared to pay significant premium to listed companies or their subsidiaries, special channels or businesses and that's getting gradually factored into the secondary market prices as well.

At the same time, as normalcy returns and we see gradual domestic consumption picking up, advertising also will pickup and that had a pretty disappointing year 2008-09 and the year so far as well. My sense is that 2010-2011 may turnout to be very good for the entire media industry. These businesses have high operating leverages, which means that if the advertising revenues or the advertising spend picks up by 15-20% or so and the revenues of media companies pickup by about 15-20%, one could see almost 70-80% increase in the bottomline because of the nature of the business. I think that is trying to get discounted in the stock prices but one needs to be a bit careful and selective within this space.

Q: What about sugar, would you avoid it or buy into weakness here?

A: In spite of what is happening in Northern India, especially Uttar Pradesh, as well as the kind of problems which the government is facing, although there is no denying the fact that the fundamentals of the sugar industry has improved, prices are on the high side. Margins are looking up and in the lean period most of the sugar companies have diversified their revenues, setup power plant, so there is some amount of stability in the earnings as well. At the same time, valuations are not out of whack and maybe over the next 12-24 months one could have surprise performance coming in from these companies. So I would be a buyer at decline within the sector and my sense is that if oil prices remain at the levels which they are and the ethanol blending programme picks-up in true earnest then these could be quite positive for the industry. You could see investor interest again increasing even from these levels, so my view is generally positive on sugar industry.

Disclosure: We have investments and recommendations in several stocks in the sugar industry.