Crossing 5200 is herculean task for Nifty now: Baliga

Market analyst Ambareesh Baliga believes that given the policy inaction and political issues crossing 5,200 on the upside would be a herculean task for Nifty.

"Hopes can keep the market going for a while, but you require action at the ground level for the markets to sustain and move beyond," he said in an interview to CNBC-TV18. Lack of policy action will drag Nifty closer to 5,000 in days to come, he warned. "People have actually lost patience with Delhi. Unless you have that action happening you really can’t see any further movement in the market." Below is the edited transcript if Baliga’s interview with CNBC.TV18. Q: It’s been a very quiet July series. What are your expectations for August? A: If you look back, I have been saying that hopes can keep the market going for a while, but you require action at the ground level for the markets to sustain and move beyond. At that time we are talking of moving beyond 5,400 levels. But inaction on the policy side and political issues has broken the market. We were saying that this week could be a break or make week for the markets and it’s been a break week. We have closed below that 5,200 levels. Crossing 5200 would be extremely difficult for the markets. Unless we really see action at the ground level I don’t think we could even cross those levels. People have lost patience with Delhi. Unless you have that action happening, you can’t see any further movement in the market. It will drift down and I will not be surprised if you see levels of closer to 5,000. Q: What are you expecting to hear from BHEL this time? A: BHEL could be a bit muted. The street is expecting 5% or 6% sort of a rise in profits and in case it is slightly better you could see some sort of a bump up. But unless you really have policy action happening you don’t expect too much of a movement in either infrastructure or the capital goods space. I suppose it would be more or less like range bound. Q: Yesterday all those stocks which are going out of stock Futures fell off quite sharply, 4-5% cuts. Is the adjustment done or do you expect to see pressure continuing on these names? A: The pressure will continue for a while. There will be like unwinding in these stocks. But most of it has been done yesterday. So you could see a further fall of possibly either 2-3% more. Going ahead it will be driven by the financial performance and not too much by speculation. Q: Historically what has the correlation been between weak rainfall and how much the market has fallen? In the past what is the kind of drop that we have seen on the Nifty during periods of drought? A: It has that effect immediately on the markets, because as soon as we get to know that the monsoon is weak, it has sort of a sentimental impact. But the longer term impact clearly depends on how the inflation moves. My expectation this time is that there may not be too much of a correlation between the low monsoons and inflation, because we have had a bumper food grain production last year. But again if we have more weak monsoon next year, that I suppose will have a bigger impact than what we will see right now. I suppose the impact will only be limited to possibly oil seeds and coarse cereals, rest of the commodities there may not be too much of impact. Q: What do you do with yesterday’s star HCL Tech? How much more upside can it justify? A: Based on the results we have seen that upside. Now I suppose the overall issues of the IT sector will weigh on that stock. There will be profit booking at these levels. _PAGEBREAK_ Yes, I suppose compared to the rest of the IT pack it could outperform. But then when you expect the overall IT pack to underperform compared to the market it doesn’t really make sense buying into HCL Tech or even a TCS at this point of time. Q: What about something like Jubilant Foodworks? What did you make of the numbers and how would you approach the stock? A: Numbers were decent and it’s been surprising quarter over quarter. But the way things are I really don’t expect this company to keep surprising us in the next at least three or four quarters because the expectations have been going up. If you can’t keep up with the expectations you could actually see a cut like the way we have seen a cut in Asian Paints. I suppose a similar story could also play out for TTK which again has been the darling of the market for a while. The biggest issue with such companies is that expectations keep moving up and if you don’t keep up with expectations you have a major crack. So for Jubilant again at these levels surely from an investor’s point of view I will start booking profits. Q: The pocket that has seen the smartest action this series is sugar with almost 19-20% gains for many of those stocks. I would you approach it from hereon? A: Like I have been maintaining the upside for sugar is limited, because anyway the sugar prices are moving up, but the production is going to suffer thanks to monsoons. So that will be also a pressure on margins of the sugar companies. The upside from here is limited. For example, something like a Renuka I really don’t see that stock moving beyond levels of about Rs 36-38. Q: What would you do with the auto sector now? Not only are the numbers weak, but the commentary from managements continue to be bearish at least for the next couple of quarters? A: This is what have been saying now for the last five or six months especially when the numbers were fantastic month-on-month. I said it really can’t continue for too long. It has shown in the last couple of months and I expect this trend to continue till about September-October. Till then I don’t see much of an upside, but again quite a few stocks have come to decent levels, especially something like a Tata Motors where possibly I see a downside to levels of about Rs 195-200. At those levels one should look at buying. For Maruti the problems are still continuing, so Maruti could see still some more downside closer to levels of about Rs 950-975. Q: Between the top tier IT names anything that you would buy at this level? A: I wouldn’t touch IT at this point of time, but in case it has to be in your portfolio, you have allocated some funds for IT sector as such then I suppose only two stocks in the big boys which you can buy are HCL Tech and TCS. Other than that I don’t think there is anything worth touching. Q: How would you approach something like JSPL now after the numbers? A: I don’t track JSPL very closely, so it’s a bit difficult for me to comment on that. But Bharti has been my favourite for a while and that’s been in a trading range Rs 290 to about Rs 330-335. This possibly could be a good time to get into Bharti. The downside is either Rs 5-8, but then one can look at about Rs 325-330 levels.