Liquidity can drive market higher; bullish on Ceat: Baliga

The market could rise further, driven purely by liquidity, feels Ambareesh Baliga of Edelweiss Financial Services.

In an interview with CNBC-TV18, Baliga said traders should hold on their position and try to ride the momentum wave. However, investors should look at booking profits because fundamental factors and macros do not support the market at these levels. It is time to book profits at every rise, he recommended.

Also Read: Pledged shares value in Q4 steady; 10 pointers: Edelweiss

In the midcap space, Baliga is bullish on tyre manufacturer Ceat given its strong earnings performance in fourth quarter. He sees the stock touching Rs 145-150 going ahead. One can also consider Talwalkars Better Value Fitness, which is likely to grow 35-36 percent on a year on year basis.

Meanwhile, he advised investors to avoid public sector lender, Punjab National Bank till Q4 results are announced. “In the last two-three quarters the earnings have been quite volatile. I am bit skeptical at this point of time looking at the volatility. It is just time to stay out and possible wait for the results,” he added.

Below is the verbatim transcript of Ambareesh Baliga's interview on CNBC-TV18

Q: It has been a fantastic run so far, how are you calling the rest of May?

A: Clearly, there is momentum in the market. Liquidity has been flowing in relentlessly and so we could see some more upside, consolidation at higher levels. Although, we didn’t expect these levels but since momentum is there, traders should continue holding on and possibly moving with the momentum. However, for investors it is time to book out to a certain extent because we see that fundamentals and the macros don't support the market at these levels and so it is time to book out at every rise.

Q: We have seen a bunch of midcap numbers so far. Is there anything that you have worked out as a top four-five picks list from what you saw on earning season?

A: From the recent results that we have seen, Ceat is something which has slightly surprised on the higher side. I have been recommending that stock for quite a while because the replacement market and the rubber price is coming down. This has been playing out, so Ceat is one stock which can further move up from here possibly to levels of about Rs 145-150.

Talwalkars Better value Fitness is another one where it has been more or less in line with expectation. We are still seeing a growth of about 35-36 percent year-on-year (Y-o-Y) so that is another stock to be looked at.

_PAGEBREAK_

Q: How would you approach Punjab National Bank today ahead of its numbers? That stock rallied 7 percent last quarter after reporting stable asset quality, what is the expectation this time around?

A: In the last two-three quarters, the earnings have been quite volatile. Although there are expectations that it would be in line with what we saw last quarter, but then I will be a bit skeptical at this point of time looking at the volatility which we have seen in the past. So it is just time to stay out and possible wait for the results.

Q: When you talk to your clients and your investors, what is the sense that you are getting about retail participation? Do you see it come back into the market now that we have touched the 20000 mark or will this market continue to be fueled by foreign institutional investor (FII) flows?

A: It will be fueled by FII flows because people are still quite skeptical and this sudden move we saw from those 5600 levels to the current levels has caught a lot of people unawares and on the wrong foot. So unless you see consolidation at these levels over the next few months and possibly moving up further from here, only then these investors will come back. However, I don't see that happening looking at the political upheaval which is happening right now and elections in the next few months. Possibility of that happening is difficult, so investors will still continue staying out. We see participation is not there in the market.

Q: How would you approach a stock like ITC now, that stock hit a record high yesterday, another one and it has pretty much been instrumental in taking these markets higher in the last fortnight or so? How much more of an upside do you see there?

A: It will be a slow and steady move unlike the move in Hindustan Unilever (HUL). I don't think that would happen in ITC. But if they are talking of slightly longer term that is one of those stable stocks which could give you 18-20 percent return. Even in the past, my picks in the FMCG sector were more of ITC than HUL.

Q: Did you like the numbers that SKS Microfinance posted this quarter around, yet again a profit after the profit that they saw last quarter?

A: Absolutely. I was saying this for the last 12-15 months, when we saw that major crack in SKS and it came to double digit levels. They were then changing the model which should play out possibly in the next couple of quarters. Now we have seen the last two quarters that they have turned around and this trend will continue. So even at these levels it is still a buy.

Q: Would you be positive on Jubilant Foodworks or still uncomfortable with the valuations there?

A: I am still uncomfortable with the valuation of Jubilant Foodworks because that has been the darling of the market in the last two years and expectations are quite high. Meeting those expectations quarter on quarter seems to be a bit difficult looking at the way the performance has been in the last two quarters. So the risk reward ratio is not favourable at this point of time and therefore, I wouldn’t buy it at this point of time.