Don't rush in; better buying opportunities ahead: Baliga

After the severe crash in the Indian currency and thereafter the stock markets, Ambareesh Baliga of Edelweiss Financial Services says there is a lot of scepticism among investors. "People have lost across various asset classes, so the trust levels are extremely low and the ad hoc measures that the government has taken in this crisis like situation to address a problem isn't really addressing those problems but creating new," he told CNBC-TV18 in an interview.  

In Friday's markets, the rupee breached its all-time low and was selling at Rs 61.7-61.8 to the US dollar, while the BSE Sensex was down nearly 750 points towards the close. There is fear in the air because the RBI sent a message of utter panic on Wednesday when it started imposing capital controls on outward dollar remittances by Indians. The bank also banned property purchases abroad and clamped down on gold imports. (Also Read: Why Mark Mobius is staying put even as Indian mkt bleeds)
According to Baliga, there is a possibility of a "decent bounce back" because of short covering. "We could see levels of closer to 5600-5650. But in case we break, these levels decisively on Monday, then it opens up the next set of band of another 300-400 points more," he cautions.
However, he doesn't recommend buying at this point of time looking at the technicals in the market. "It is best to remain on cash because one could get a lot of great opportunities going ahead in the next two or three months," he says. Below is an edited transcript of the interview on CNBC-TV18. Q: The big debate in the market last week was whether 5500 will break conclusively or not. Do you think we will manage to hold it again?
A: There is a lot of skepticism in the market. People have lost across various asset classes so the trust levels are extremely low and the ad hoc measures that the government has taken in this crisis like situation to address a problem isn’t really addressing those problems but creating new.
Whatever came in the last two days to help arrest the fall in the rupee hasn’t really helped but has increased the skepticism among foreign institutional investors (FIIs) that possibly there could be exchange controls going ahead and because of that we have seen some amount of selling there.
Also, we saw a lot of short sellers getting on the band wagon and going short on the market because of which there was nearly 800 points correction on the Sensex. But as far as the Nifty is concerned, we should see some support at these levels.
In case we don't break the present levels, we could see a decent bounce back possibly because of short covering and could see levels of closer to 5600-5650. But in case we break these levels decisively on Monday, then it opens up the next set of band of another 300-400 points more. Q: Would you be advising any kind of buying going forward?
A: I won’t recommend buying at this point of time because looking at the situation that is quite fluid and in case we see further sell-off by FIIs, these names could get affected. Although, there could be great buys but looking at the technical position in the market, it is still time to stay out for a while.
It is best to remain on cash because one could get a lot of great opportunities going ahead in the next two or three months. One should just hold on to cash. Q: How do you see this market play out? Do you believe that market is headed well below 5500, numbers like 4800-4900 are expected on the Nifty, do you think we can see those levels?
A: It is quite early to talk about 4800 levels at this point of time. But in case we break the 5500 levels decisively, then the next level to be watched out for would be about 5200 Q: Do you recommend buying any banking stock at this point in time?
A: Not right now. There is still pain in the banking space and looking at the way the economy is going, one will have more non-performing assets (NPAs) cropping up going ahead. Also, the treasury income will fall looking at the way the bonds have been moving – so the next 2-3 quarters could be tough for the banks. One can actually see most of them especially the PSU space cracking further so there is still time to wait and watch. Q: Do you think now the IT, fast moving consumer goods (FMCG) space will turn around or are these still places to hid?
A: The only place to hide right now is pharma and IT. But then if the markets crack further, in case we see levels close to 5200. It is quite natural that these are the stocks that could crack somewhere from here, in fact, the crack may not be as much as what the market would warrant but still one will see some crack.