Nifty may hit 5200; bet on pharma, consumption: Edelweiss

Nischal Maheshwari, Edelweiss Financial Services believes with the rupee at 62 against the dollar, the market may head towards 5,200 going ahead. But, the broad range remains between 5,100-5,500.

He told CNBC-TV18 that one can still consider investing in safe havens like pharma and consumption stocks. The demand in IT sector continues to grow stronger due to falling rupee and is therefore, likely to outperform. On the other hand, banks are likely to remain under pressure. Also Read: Market suffering from bipolar disorder; FIIs scared: IIFL Below is the verbatim transcript of Nischal Maheshwari's interview on CNBC-TV18 Q: There was about Rs 500 crore cash market selling on Friday. What do you think is really taking place? Who is selling? Why are we seeing big cracks now on the Nifty?
A: The institutional selling is not much. If we have to look at the stocks and the futures together, FIIs were something less than Rs 100 crore selling. Domestic institutions were net buyers. So, this is the domestic market sellout happening and National Spot Exchange (NSEL) payout getting delayed could be the next trigger. NSEL’s Rs 5,400 crore debt is a large number.
The number is getting pushed into the stock market now and that is what I feel. I have nothing to corroborate on that, but there has been no other trigger for this kind of a sellout, because this is largely margin selling which is happening right now. Rupee is not helping the matters, so the pressure continues.

Q: What are you telling your clients at the moment? Are you seeing 5,200 as the next line in the sand?
A: Yes, for a long time we have been holding onto 5,500-6,100 range, which has broken down now, but that was expected because my 5,500 on the lower range was in expectation of 5.5 percent gross domestic product (GDP) growth. That number now seems difficult to achieve and we should be close to somewhere around 5 percent or lower.
With the rupee at 62, a 5,100-5,500 is what now I believe would be the next zone where the broader indices should trade and in that kind of a scenario I believe 5,200 is a definite possibility to happen.

Q: Should we now start to see some pressure on some of the outperformers, because so far pharma, IT have been spared, infact they have been going up quite a bit this year. Would you expect some selling to happen in stocks like Lupin and Sun Pharma? Could some FIIs maybe billing out of some of these outperforming stocks?
A: Yes, definitely the pressure is coming from FIIs, then they only hold those 10-15 stocks here in larger quantity then the pressure would come in. Friday, doesn’t seem to tell you that the FIIs are sellers in a big way and that only gives me the comfort that if it is not FIIs and the DIIs that are selling then this selling would be temporary.
Given the market was holding on and the economy was in a different direction altogether, so some amount of capitulation had to happen, which has happened.

Q: In terms of banking, though they have already capitulated so much, but at these levels, would they still be short?
A: If the market has to fall from the present 5,400-5,100 level, it will be still largely led by the banks, because just now 30 percent of the Nifty is banks and the last safe haven is there, besides pharma and the consumption stocks are concerned.
Now for pharma and consumption atleast the outlook doesn’t seem bad. So, those stocks will still remain the safe haven and the banks that are holding on despite the economy going the other way, I think that is where the pressure will continue.

Q: Should people take money where the falls have not been so big like the HCL Tech and the fast moving consumer goods (FMCGs), Lupins because inevitably you may see selling there? Are you advising people to move out of those stocks?
A: If you do not need to be in India at the moment and don’t need to invest into equities, I don’t see any reason for you to hold onto equities. If you have India-dedicated fund and you need to be in India then these are the safe havens that one should be in.
IT is one sector where people may go out and buy given that rupee is in your favour and the US demand is pretty strong. So the demand continues to grow stronger and therefore, on an absolute basis as well IT will outperform