Nifty looks strong, may see 6000; bet on largecaps: Experts

The Indian market gained momentum post Obama's victory. The Nifty broke past its near-term resistance to close above 5,750 on good volumes.

The market gained for the sixth consecutive session today. The Sensex gained 85.03 points and ended at 18,902.41. The Nifty rose 35.70 points to close at 5,760.10.

In an interview to CNBC-TV18, Amit Dalal, Tata Investment Corporation says Obama’s victory is not something that Wall Street will cheer a lot about. However, he says, the Indian market is performing on its own merit, own technicals. "For the market to ride further, ofcourse, we need more from the parliament and the government. But definitely the strength of the market remains for the time being," he adds.

In the last one year, Dalal says, the Sensex has gone up some 7 percent, whereas about 80 stocks, only in largecap space, with a market-cap of more than Rs 2,500 crore, have gone up more than 30 percent. "You have a basket of leaders now to choose from. Many of these companies are still available at less than 15 times earnings. I just urge people to look for these stocks," he asserts.

Meanwhile, Sudarshan Sukhani, s2analytics.com says for short-term trader, it is a very good time to take some profits off the table. “For anyone holding a position or building a position, we have a target of 6,000. This will not come easily. There will be ups and downs and pulls and pressures. So, volatility will have to be accepted. But if the trader is prepared to accept the volatility, I think position traders should hold on to their Nifty positions or even initiate them at current levels with the understanding that a 100-point decline can always come,” he suggests.

Below is the edited transcript of Amit Dalal's on CNBC-TV18.

Q: How the market is headed from here, now that one more trigger is out of the way?

A: Definitely, in the US, Obama’s victory is not something that Wall Street will cheer a lot about because they were rooting for Romney now for almost two-three months. There is going to be taxation issues, which will come on the fore, in the next couple of months. Those issues are something that the Wall Street has been ignoring and trying to see that it perhaps will go past, but that is not going to be the case. Therefore, those markets will remain under pressure in terms of participation and any upside.

I think our market, to a large extent, is performing on its own merit, own technicals that have become so strong because of the buying that has taken place in the last 10 months in India. The last 500 points is the Chidambaram effect. That Chidambaram effect is very strong in our market. For the market to ride further, ofcourse, we need more from the parliament and the government. But definitely the strength of the market remains for the time being.

Q: How would you approach the IT stocks? There was anti outsourcing stance that Obama had. There was a fear that if he comes back into power there will be negative impact on many of these IT companies. Would you worry at all or will it just be discarded?

A: I do not think so. I think that has been talked about, since the previous elections also, when Obama was elected. There was a huge fear at that time. At that time, the need for their economy to get that support was even larger than it is today. But the IT space, especially the large IT companies, is concerned, if you analyse the first two quarter results, a substantial improvement in their earnings has also come because of the effect of currency in their favour.

Going forward, if we truly believe that our market is going to be strong and we believe that commodities are going to be weak, the weakness in our currency and perhaps the pressure on current account deficit will be a lot lower. That may not allow us to give higher growth of earnings for ’13-14 for IT companies. That means that these shares will not perhaps go up substantially from here.

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Q: As we head into Diwali, there are many on the Street who believe that there is further upside for this market. If I wanted to position my portfolio to benefit from the upside, which are the sectors that one should now be overweight on?

A: We just did an analysis for the last one year. It may help in terms of both sectors and stocks. In the last one year, the Sensex has gone up some 7 percent, whereas about 80 stocks have gone up more than 30 percent only in largecap space or what we consider to be medium to largecap with market cap of more than Rs 2,500 crore. So, you have a basket of leaders now to choose from.

Many of these companies are still available at less than 15 times earnings. I just urge people to look for these stocks. It is not difficult. Limit yourself to three or four of these stocks, at any one point of time. I think gains will be made. Will it be made by Diwali or a couple of months after that? One obviously cannot judge. But I think these will stay as the forefront of capital appreciation for sometime to come.

Q: The pocket, which has seen by far the best performance, up until now, both in stock specific movement as well as in result reactions, has been pharma. If you had pharmaceutical names, would you accumulate many of these frontliner names? Would you add fresh positions as well?

A: Yes, absolutely. I think both in terms of the international positioning of their businesses and ofcourse there is the domestic risk of the government, otherwise, the market has been responsive to most pharma products. An improved financial situation in the hands of the people will always lead to perhaps more healthcare spend in India. But even so the largest amount of income does come for many of these large companies from the overseas business. They are well positioned.

In a way the healthcare cost cutting philosophy of the Obama government is going to finally help generic manufacturers and going to improve and increase the size of the market, which is available to them, in a far easier fashion than it did in the past. So, that in itself is an upside, just like we think that Obama’s presence is negative for IT. In terms of pharma, I think they will have a better environment to work in. So, I remain very positive on that side.

Q: Barring the frontliners like DLF, there has been a big surge in earnings momentum in many of the smaller real estate players, the ones in the Bangalore market etc. Do you think an investor has missed the bus or is there still more potential to plough in money into this space?

A: In terms of ploughing money into the real estate space, I think definitely there is room because the niche markets are doing exceedingly well. The only controversial market was Mumbai. But now the supply and demand is much better-off this year than it was last year in Mumbai.

I would not shy away from many of these investment opportunities, except one has to be careful of balance sheet, one has to be careful of management. If you are careful with these two and selectively put money into stocks, I think there is perhaps more upside into the real estate space.