Close positions; short metals, bet on Tata Global: Experts

Fears that the US Federal Reserve could tighten monetary policy and profit-taking after the recent run-up, caused the BSE Sensex to close at 19,691.67, down 430 points over the previous close and the Nifty to end trade at 5,980.45, down 127 points.

With the market witnessing a sudden and sharp downside, Sudarshan Sukhani of s2analytics.com recommends traders to close all positions to bring the short-term trend to a halt.

"I recommend closing of long positions on the Nifty . Trades should now be taken on the downside until the market rallies again."

ITC, the largest stock on the index, fell five percent. SP Tulsian of sptulsian.com dismisses the impact of Jubilant Foodworks' earnings on ITC. "Jubilant has witnessed exuberance in trading over the last one year and cannot be compared to ITC where the zest has seeped in over the last one-and-a-half months and has been irrational at times. The exuberance in ITC may be due to the liquidation of huge long positions. The stock was ruling below Rs 300 about one-and-a-half months ago and this liquidation may cause the stock to correct to about Rs 315."

Though Reliance Power saw no change in its net profit for the quarter, the stock was down 4 percent. Tulsian says that the company’s bottom-line was better due to a tax write-back of Rs 30 crore. "It is difficult to take a call as the company is in the process of bagging projects and making them operational in phases. The market is more concerned about the dilution of equity in entire Sasan ultra mega power project (UMPP)."

Raamdeo Agarwal of Motiwal Oswal is bullish on Bharti Airtel based on company's domestic operations and the overall recovery in the telecom industry. "The profitability is returning to stability. The company is growing at a double-digit rate."

In the last hour of trading, SP Tulsian offers short calls on two stocks —United Phosphorous, with a day target of Rs 142 and stop loss of Rs 147 and Tata Steel, with a day target of Rs 304 and stop loss of Rs 310.

Despite posting strong results, Essar Oil fell six percent. "Investors could buy the stock at a dip of around Rs 76. The stock has been made some very unpredictable moves and has not reacted to fundamental news because the counter is heavily controlled by an inside circle," says Tulsian.

In light of the sharp fall in the markets today, Tulsian’s picks Tata Global which corrected to about Rs 144 and offers a good entry point at Rs 140. "If investors really want to take selective call, housing finance companies are a good bet —LIC Housing Finance, HDFC or Repco Home Finance."

Tulsian also advises investors to go short on metal stocks — JSW Steel, Jindal Steel and Power (JSPL), Tata Steel and SAIL — and private sector banks like YES Bank and Canara Bank from the in the public-sector banks segment.

Gold-loan financing stocks like Manappuram and Muthoot have been quite volatile. "I don’t expect further erosion in the value of stocks in this segment in spite of the weak outlook on gold. The price of gold in India is determined more by the parity in the value of the rupee against the dollar than by the global market."