Clueless mkt to stagnate at 5550-5600 levels: Anand Rathi

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Clueless mkt to stagnate at 5550-5600 levels: Anand Rathi

Markets are in no mood to change its current position, believes Rajan Malik of Anand Rathi Financial Services. Nifty will continue to face tough resistance at 5550-5600 and can go down to 5,350-5,400 on the downside and 5,550-5,600 on the upside. He says there is no evidence of any market-moving trigger in the periphery.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets

The market is in no mood to change its current position, believes Rajan Malik of Anand Rathi Financial Services. Nifty will continue to face tough resistance at 5550-5600 levels. It can go down to 5,350-5,400 on the downside and 5,550-5,600 on the upside. He says there is no evidence of any market-moving trigger in the periphery, and the only visible trigger at the moment is the second quarter results.

Below is a verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: What is easier for you to see from here 5,700 or 5,200?

A: We still continue to face that tough wall at 5,550-5,600 as of now. Unfortunately this band seems to be reducing by the day. What is happening is we had a 500-600 point band on the Nifty, which has now become almost 200 points that is 5,350-5,400 on the downside and 5,550-5,600 on the upside.

The market does not seem to be in a mood to be going anywhere as of now. What we need as a trigger one way or the other. I do not know if it's going to be an event because if it were not to be for an event you are probably looking for the second quarter results in October that will probably provide a trigger for this market either way.

Q: What about the entire global setup that we have to deal with? The month of August has not been too great in terms of economic data? What do you foresee from here and how much of a downside risk do markets like ours see?

A: The US, had probably the worst August in about nine years where indices were off about 5%. Yet in two days time almost 4% has been taken out and you are back where you started from. Everybody seems to be in the same zone not knowing where to go.

Data points continue to be negative, but the market seems to be latching on to any positive news that it can. The manufacturing data came out and suddenly you saw a very sharp pullback. The market is clearly waiting for a bigger trigger, either way and it's very difficult to say which way it would move, but a band cannot continue forever.

Q: Triggers and events are difficult to predict. If something does not come through in September do you think we still amble around in this 5350-5550 kind of a zone ballpark?

A: In that case you will find a trigger in the next quarter results. There was nothing much to talk about or become euphoric over the first quarter results. If anything there were some disappointments and from a 25-26% growth people have paved down their expectations. Unless and until people pair up their expectations and say okay, we may be headed up. There is very little room on the upside as far as valuations are concerned so we got to be watching out very carefully.

Q: For Reliance , there are still many potential pitfalls that are restraining the kind of positive view on that stock. What is your view on Reliance going forward and whether or not it would contribute to any kind of movement?

A: This stock has underperformed. Everybody believed that ultimately Reliance should be the leader, were it to move up, it should take the Nifty to a new level. Unfortunately it's been breaking all kinds of support levels with considerable ease. First it was Rs 970-980, it broke that then it was Rs 950, it broke that yes, it has respected Rs 900, but I do not think as of now there is any reason to believe that it could lead us up unless and until it goes and stays for sometime over Rs 1,000 levels. The issues about the fourth tranche at the DG6 ramp up, they all remain. So we have to wait and see.

Q: What about banks? Tat has been the big driver. It has corrected with some signs of life creeping back again. Do you think banks have it in them to drive a second leg of the rally for the Nifty?

A: Banks have been a clear outperformer like the autos. We have got to start looking for fresh triggers here in terms of credit growth. The net interest margins (NIMs) were very stable and good. There were some asset quality questions in the first quarter results. Should growth pick up which we believe ultimately if this market has to go up, there has to be growth pick up and then banks may continue to lead. After all they constitute almost 28% of the Nifty.

Q: How do you approach a stock like JP Associates which is a mix of infrastructure and cement?

A: The cement division seems to have done quite well. The engineering, procurement and construction (EPC) side of it is not very certain, one could say there is value and we like the stock at the current levels especially because we also believe Delhi NCR is very niche area for this company and that's an area that's growing very fast. There is no reason to believe that this company should not move forward from here.