Mkt upmove was surprise; no recovery in near-term: Experts

Sudarshan Sukhani of s2analytics.com explains to CNBC-TV18 that the upmove seen on the Nifty is a pleasant surprise. "In the morning, the strategy was to go long as an intraday trade and try to exit in the afternoon if the markets start stalling. But the markets have not stalled and in fact, they are at the highest level of the day. Given the volatility in the markets, it is sensible to exit these trades at a reasonable profit. Anyone who bought at any point during the first half is making money."

"Tomorrow again we will have to take a fresh view. It is not enough yet to say that the trend has changed. It may well have, at least two days suggest that something interesting is happening. But traders should take profits today and if we see follow-through or stability tomorrow then the short-term trend will also change."
Meanwhile, Anand Tandon, CEO, JRG Securities maintains his bearish outlook and adds that it will take longer than expected for the markets and the economy to improve due to factors such as the high interest rates, uncertainty regarding Parliament and the global financial crisis and lack of adequate interest in disinvestment. Below is an edited transcript of the analysis by Anand Tandon on
CNBC-TV18. Q: What do you think is in store for the markets between now and the end of the year?
A: Not a lot. I heard a lot of investors earlier say that they were expecting the market to make a new high. I have always been of the view, for the last few months now, that there are very few triggers to move the market beyond the 5,700-5,800 range. The markets have had a good run in the prior month with more than a fair share of inflows. There is nothing particular, in terms of policy beyond that which is good for the foreigners, which is going to change anything for the local market so far.
Interest rates, I must be one of the few remaining bears, who think they are likely to remain high for longer than most people anticipate. Overall, though valuations are slightly not so challenging, they are not very low as they were two months ago. The earning cycle is still fairly tepid and interest rates are high. I do not see why the market should take off from here in a hurry. Q: On the other hand, do you see a prospect of correction or do you think the corrections too might be shallow essentially leaving the market range-bound?
A: Most likely I would bet that the correction would be shallow. However, the overseas market is again beginning to act up a bit. I think Europe continues to now again exhibit strong stress. The so-called fiscal cliff will be harder to climb than most people imagine because though there is high expectation for the tax breaks to go away, Obama’s victory was on the promise that he would not do away with any of the benefits enjoyed by the weaker sections.
So the positions there are very much entrenched and it’s very unlikely that a very easy solution would be found. So, to some extent, the international markets will dominate and if Europe turns a little for the worse, there may be sharper flows than many anticipated. Q: What about local cues? What are your expectations on the newsflow through December from New Delhi?
A: Obviously there is some attempt that seems to be made, in terms of trying to get Parliament to function. I think the real joker in the pack would be whether the FDI in retail would be a compromise which the government is willing to make in terms of letting the debate happen on the vote.
If it does not then I think the likelihood of any major legislative action happening is somewhat bleak. If it does ,then I think you may have some of the Bills passed. I do not think that many of the contentious bills will be passed very easily. But at the same time, I think some amount of legislative action maybe possible. If it happens, I think to some extent the market will heave a sigh of relief, that at least there is some progress on legislation. Q: What are your expectations on how this FDI in retail will play out and how you would approach a stock like Pantaloon in that light?
A: I think you will have to take a slightly longer term view than just this Parliament session. From the point of view of the Opposition, the FDI in retail is crucial because most regional parties seem not to be in favour of it, whereas the ruling party and its allies seem to be.
So if it does come to a vote, its very likely that the government may face some embarrassment in terms of being voted out which means that, in all probability, there will be no vote and the policy will stand where the government has placed it.
This might make many of the investors feel a little nervous, because if there is no certainty that the entire country or polity is behind the FDI policy then it is uncertain that the policies will change if and when a new government was to come to power.
So there has been a good run on the retail side on the assumption that FDI in retail is going to happen. I doubt very much that there will be any change in that position after the current Parliament session and therefore its pretty much status quo, but with a little bit of an overhang.
Therefore I wouldn’t be surprised if some of the retail plays do give up a little more on the basis of this fear. Longer-term, of course the story may continue to be reasonably good especially since we are betting on the fact that the foreigners will come in and buy-out or take a stake in some of the existing chains. But for them to turnaround and make some serious money, will be a decade-long story. Q: The other big issue is the slew of divestments or stake-sales which have been lined up. Do you think it will again fall on LIC's shoulders to lap them up or do you see market appetite for these companies?
A: I think appetite will be there provided they are priced at a discount. One of the problems is that the discount of a few rupees is not of any use because one can buy a few chunks of the company’s stake in the market. Unless and until there is a very large FII that is looking to put in a few hundred million dollars or more at one go, it is unlikely that there is going to be any interest, especially from either the local institutions or local retail.
So you have to look at allowing a significant arbitrage to build up and whether it is acceptable for the government to do that is an issue that it will have to figure out because there will be allegations of selling the stakes too cheap. So the government will have to kind of face the music on that but it can sell the stake if it makes sure that there is significant arbitrage is allowed. Hindustan Copper I think maybe a little more easily saleable, but that again will face similar kind of problems.