Retail investors cautious; see new highs in Feb: Baliga

With the Sensex gaining 14 points marginally to close above 20,000 and the Nifty rising 0.1 percent on Wednesday, the January series comes to an end today. Ambareesh Baliga, Independent Analyst tells CNBC-TV18, that even though the market saw new highs in January, nothing substantial happened. He sees resilience in the market and hopes for new highs in February. "Retail investors have turned cautious and will be back in market once the Nifty touches 6,300-6,350 levels," Baliga adds.

Further Baliga feels that issues related to corporate governance are responsible for the fall in HDIL, IVRCL, Opto Circuits.  Baliga is bullish on Suzlon Energy as it brags a 350 megawatt (MW) order. "I think this stock can move to levels of about Rs 27-28, those levels of Rs 17-18 are over. We have crossed that Rs 20-21 levels decisively," adds Baliga

Below is an edited transcript of Ambareesh Baliga's interview on CNBC-TV18

Q: What are your expectations from the February series?

A: It has been slower than our expectations. In fact, the market was hitting new highs in January itself, but somehow that has not happened. So, we are seeing resilience in the market and possibly, we could see new highs in February itself.

Q: What is the problem with HDIL, just not stopping the fall?

A: The corporate governance issue is something which the markets cannot digest and we have seen that in the past that wherever such issues come up, those stocks and sector overall get thrashed because of that. What we saw in the last one week to ten days was because of whatever happened in those four-five stocks where the corporate governance issues and because of which we saw that whole sector come down. Going ahead, I do not think the market will ever pardon any promoter or any management, who has corporate governance issues.

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Q: The other problem stock has been IVRCL, any thoughts on that?

A: Yes, the case is similar to HDIL. Stock like HDIL, IVRCL, Opto Circuits, have corporate governance issue because of which they have been cracking. However, among these, I would be slightly more positive on IVRCL as compared to HDIL.

Q: How are you approaching IVRCL, Nagarjuna Construction which have started collapsing?

A: These stocks are best ignored for the time being because you have other infrastructure stocks to be bought which are still quoting at extremely good valuations. Even the larger ones like Larsen & Toubro (L&T) or Bharat Heavy Electricals Ltd (BHEL) are quoting at decent valuations with hardly any risk. In this kind of market, it is always better to go with those stocks than with the ones where there is a problem and are hoping for a turnaround. So, it is better to stick with the bigger boys.

Q: Any thoughts on Suzlon Energy, their debt recast is done and today they got a large 350 MW order?

A: A clear case of turnaround also in sentiment, because one of the biggest issues for them was a balance sheet. In last 18-24 months, order flows have been decent but because of the balance sheet issue, the stock was not performing. Now with that behind and order flows continuing, hopefully execution will be in place. This stock can move to levels of about Rs 27-28, levels of Rs 17-18 are over. We have crossed Rs 20-21 levels decisively. So, the next stop for the stock should be closer to Rs 27.

Q: Any change in retail sentiment that you have seen through January or in the run-up to the Budget now? Is the retail crowd still cautious?

A: They have again turned cautious. Those who started coming and buying into mid-caps, after the fall which we saw in the recent past, again they have gone back into their cocoon and it will take a while for them to come back and start buying into the market. That will happen once the Nifty touches 6,300-6,350 and these people will come back and make those new highs.

Q: So far, which have been the top two-three stand-out midcap performances for you from this earning season?

A: Not many surprises as such, most of them have been in-line with what we were expecting but surely among the large-caps it was IT which stood out and on the negative side, it was Hindustan Unilever Ltd (HUL).