Nifty correction a given; may see 5500 in near-term: Baliga

The Indian equity market is seen heading downward in the near-term and the Nifty may touch 5500-5550 soon, cautions Ambareesh Baliga, managing director, Edelweiss Financial Services.

"We will catch up with the global markets that have seen lows in the recent times says. The main focus will now be on whether the correction is a sharp one or not," he told CNBC-TV18 in an interview.

Meanwhile, Baliga says that the FMCG stocks like most others are risky at the moment. "These stocks seem quite expensive at this point of time because with the way the economy is going and the sort of low confidence in the market, clearly the discretionary spends are going to come down," he adds.

Below is the edited transcript of Blaiga’s interview to CNBC-TV18.

Q: Hectic day of trading yesterday. How do you expect the market to move over the next couple of sessions, is it likely headed lower or will it stabilise here?

A: I do not think there is any question whether it will head lower or head higher. I think most of the concern on the street is that it will head lower. Nifty is doing catch up with the rest of the markets, which have been down for quite a while. It is only a question as to how sharp the downward movement would be whether it would be fast or whether it would be a slow painful. That question is difficult to answer but atleast in the short-term we see the market moving more towards 5,500-5,550.

Q: How do you guys approach telecom stocks and what is the top buy from there?

A: Bharti Airtel's results were slightly better than what we were expecting but we still see the margin pressure going ahead. We still see the African operations being a drain on the group overall. So, with the way it has moved, yesterday it is a good opportunity for people to exit to a certain extent because we don’t see too much more of an upside from here.

Q: What has the experience been for people holding positions in the midcaps or the broader market, have you seen a lot of redemption pressures or selling pressure, have you seen some margin issues cropping up these last few days?

A: Margin issues haven’t been  much in the last few days because people were butchered much earlier. Infact, their participation is quite low. So, when the participation is low, there isn’t too much of margin pressure. People have given up on the market especially the midcap space and clearly that trust deficit is there. For that to return, it will take quite a while. Possibly the next Bull Run may not have the same set of midcap stocks. So, clearly people are just waiting and watching and not investing right now.

Q: How are people reading this National Spot Exchange Ltd (NSEL) issue, is there some nervousness about other exchanges as well facing a cash crunch of sorts?

A: This would be specific to this particular exchange and there have been murmurs in the past, so people have been reducing positions. I don’t think this can be repeated on the other exchanges because they are much stronger.

Q: How do you approach some of these smaller consumer based stories like a VIP etc, would you buy these stocks or too risky?

A: At this moment, most of these stocks are risky. I would even extent that to fast moving consumer goods (FMCG) space like ITC and Hindustan Unilever Ltd (HUL) where these stocks seem quite expensive at this point of time because even going ahead with the way the economy is going and the sort of low confidence in the market, clearly the discretionary spends are going to come down.

It is basically on discretionary spends that the margins are much higher. There is no reason for people to hold on at these levels when valuation-wise these stocks are very expensive. That is the only space where you are atleast making some money. So, it is best to book out to a certain extent and stay out for a while.