Mkt may move up to 5800 resting on major reforms: Expert

The BSE Sensex and NSE Nifty gained strength in the last hour of trade amidst weakness in global equity markets. While the Nifty for the first time in last four sessions closed above 5600, the Sensex ended trade at 18,460.38.

Today's trading session was mainly for a day trade whereby investors could take out money before the market closed, said Sudarshan Sukhani of s2analytics.com. "If the market is really going up, we will have an opportunity tomorrow also. We will see a follow through. We will re-enter at higher levels if necessary but, today we need to get out," he added. Also read: Top 10 pending Bills to watch out for in winter session of Parliament
Ahead of the winter session of parliament, Amisha Vora, Joint MD, Prabhudas Lilladher feels the market could slip to 5300 if it does not pan out according to expectations. However, Vora added that for the market to break the upside, a formidable reform action like the implementation of the Goods and Services Tax or GST would be necessary. In that case, the market can touch levels of 5800-5850, Vora opined. Here is the edited transcript of the interview on CNBC-TV18. Q: Sushma Swaraj said voting on FDI is a pre-condition for parliament to function. That is the big domestic cue that we are working with. What are your thoughts with regards to this particular comment and what could we see from the winter session as a whole?
A: From the market perspective, the recent softening or slide has also been largely due to some of the fears that as the winter session approaches, the heightened political activity and non-action on reforms will continue. That is one aspect to keep in mind and market is worried about it. But on checking, it so appears that Congress continues to show a lot of optimism. I believe that is mainly coming from the fact that they could be banking on SP-BSP for support and which is why even the opposition is asking for a vote rather than the other option.
It appears that while the noise will be too much, it should go through. That is what the current understanding is. Also the noise will be so much that some of the other action might in the process get delayed which also will be equally costly for us as a country. But, we are going ahead with the assumption that this will go through. At the same time, the debacle of the government will not happen in this session. Q: What are your expectations, one you have indicated that you expect FDI in retail to go through, by way of other bills, what could we expect from the winter session of the parliament which could get cleared?
A: I think we have seen 7 parliamentary sessions going high and dry. Nothing gets delivered and whatever action happens, has happened between the session. While a lot of bills need to be put out for clearing, by the end of the session if they can manage to get at least 2-3 of them, that will be a good achievement, particularly something on banking and pension.
If that gets touched upon and gets done, it will be a very positive development I would think from the kind of track record that has been there for a while.
_PAGEBREAK_ Q: We have been pretty much rangebound in this 5500-5700 mark intermittently in the past couple of weeks. If in case the winter session does not come about as expectations and does not go through as per expectations, would you see further downside below the 5500 mark for the Nifty?
A: I would think that the downside in the markets may be up to 5300 levels. It is not impossible and I think beyond winter session also for the market to break the upside, it would need something like a GST which can really prove to be a game changer, which can really lead us through and cross that 5800-5850 kind of a range.
Till the next big step, we will continue to hover in a smaller range with some major negatives. If something happens to the government, divestment gets further delayed, fiscal deficit will continue to look large and rupee will continue to slide. In that case, I think 5250-5300 could very well be a possibility. Q: When there is so much uncertainty in the market tactically what is the call or the recommendations that you would have on your portfolio? Would you recommend anyone just for a very short-term go long on a couple of sectors or perhaps book profits in others, if you could give the tactical view on the markets now by way of a portfolio?
A: I think on a slightly medium to long-term basis, the pockets which are under extreme stress probably would be the pockets which will make money for investors. I am not saying it from a traders' perspective. The two pockets which are under extreme stress is definitely the entire infra space where interest as a cost-to-sales is ranging from anywhere between 7-8 percent up to 20-22 percent.
Of course the working capital cycle has elongated from almost 65-80 days to anywhere between 140-180 days. I think these two combined is leaving nothing for the bottom-line or rather for the negative. That is a very stressed sector both from the perspective of fundamentals as well as prices.
The reflection of that as well as the slowing economy and high interest cost on the banks and particularly on all the public sector banks have also to some extent gathered in their price-to-book multiples. So I would think that there are two ways to look at it. Either the things in terms of reforms do not move forward from here or the fiscal deficit continues to be pretty large and these sectors which are suffering will continue to be in bigger trouble.
But, in case that happens, I think the domestic consumption story which is so nicely going ahead in the last two years cannot sustain as both salaried and non-salaried income will come down in the economy. I would still say that the trouble pocket needs to bounce back.
Government as well as the overall inflation needs to support the lowering of interest rates. From a 12 months perspective, I think these are the two pockets where money will be made. In between there will be pain and probably for a quarter the things will look much more dismal. But, it is not impossible.
On the other hand, for a complete portfolio strategy, I would say you still need to be in pockets of safety which are maybe pharma and some of the others in domestic consumption space like auto and others which are not very highly priced. I think a combined strategy will get much better returns over a slightly medium to longer term period.