Go long on short-term uptrend; bet on IT stocks: Experts

The BSE-Sensex closed the day at 19,410.84 up 233.08 points while the Nifty ended trade at 5,836.95 up 66.05 points. With the market offering little cues to trade on Friday, Sudarshan Sukhani of s2analytics says that there is an uptrend at work. "Since this is a short-term uptrend, investors should start buying at current levels or higher with a stop-loss of 5,760. Though this more of speculation, it is the only approach available."

IIFL associate vice-president of derivatives Manoj Murlidharan Vayalar adds, that till FIIs start buying and the Bank Nifty begins to rally, investors have to prepare for a long straggle. "Investors can use derivatives and take bets on both sides. Buy a 5,600 Put as well as a 6,000 Call, the combination is around just Rs 60 on the premium. We have the expiry in 21 days from now and a possible 200 points upmove will double the premium to Rs 110."
Beaten down stocks like Firstsource have risen quite a bit after influential investors started to pump in funds. Anand Tandon, CEO, JRG Securities advises investors to follow the thumb rule of not trading down when the liquidity is tight even though there are stocks that look attractive on a valuation basis. "Investors looking at short-term trades have to wait for liquidity to become easy again and currently that doesn’t look likely in the near term. So it is best probably not to go valuation hunting but to stay with liquidity-based stocks which you can move in and out of quickly."
As the earning season nears, it is becoming quite clearly that the street is extremely divided in terms of what Infosys will announce in terms of guidance. But Anand Tandon says that there is no choice but to invest in IT. "No other sector other than IT is still probably growing faster than the market and offers a return on equity well above 20 percent. Though there are concerns regarding the impact of prohibitive visa rules in the US and the UK on margins there is hardly any other sector whose stocks are trading cheaper and have better fundamentals. If you are not in IT, you should be."
On Tata Motors being a good buy at the below-Rs 300 level, Tandon adds, "Tata Motors has had a stellar run thanks to the success of its overseas model. However, it remains to be seen if the company will be able to sustain overseas growth ever if it is not going introduce any new models. The next round of R&D will take up a lot of capital and the strong run may probably will continue for a little longer. Longer-term investors may have to start planning the levels at which they would want to exit."
Though the market has not had reacted considerably to the Food Security Ordinance, Anand Tandon is positive. "The Food Security Bill will dampen food inflation which will push real interest rates up that will reduce the capital account deficit and result in stability of the rupee. Increased government expenditure will also boost GDP growth."
Metal stocks like Steel Authority of India (SAIL), Tata Steel, Jindal Steel and Power (JSPL) all lost 40-50 percent of their market cap since the start of the year. Though this offers opportunities to enter, Tandon raises caution. “The metal sector can't be doing well because till global problems ease. Investors may enter selectively but the trend largely seems to be down.”
The slowdown in the economic activity is sure to reflect in the revenues of corporates in this earning season. On the sectors investors need to be bearish on, Tandon lists infrastructure followed by the FMCG sector.