Nifty will touch 5,970; no reason to exit Yes Bank: Baliga

The momentum in the market could continue and the Nifty could touch levels of 5,950-5,970. But for the market to cross those levels, the rally will have to be backed by fundamentals, says Ambareesh Baliga, managing partner-global wealth management, Edelweiss Financial Services.

Talking to CNBC-TV18, he says that investors should focus on the fundamentals of Yes Bank and not the controversy, and there is no reason to exit.

Below is the edited transcript of his interview with CNBC-TV18:

Q: It is a good day of trade. But the one pocket that is sulking on Monday is information technology (IT) because of a brokerage commenting that perhaps Infosys may scale down its FY14 revenue guidance, talks of that US immigration bill dampening earnings etc. How would you approach the space now?

A: The immigration bill clearly is a dampener for the IT space. The decent rally, which we saw because of the rupee depreciation, is already there in the price.

Now the worries are that whether the results will be up to the mark or not. I think that is where the next worry is because of which we are seeing some correction.

So, in case we have the rupee also staying in this range, you could actually see further correction going ahead.

Q: What is your view on the markets? It has been a strong rally that we have seen in the past two-three trading sessions for the Nifty and we are knocking door of 5,900 as well. Do you think that this is here to stay now and we are not going to retrace back to those levels of 5,600, or do you think is going to be a tight range for us?

A: No, what is going to stay is volatility. The sort of volatility which we have seen in the recent past will continue for a while longer.

As far as the upside is concerned, I think looking at the momentum in the market, it is very much possible that we could see levels of about 5,950-5,970. Going beyond that, I think it has to be backed by fundamentals.

So in case we see further government action, or the results are better than expected, which I doubt it would be. In case the Nifty crosses 5,950 and 5,970 levels, then I suppose you can take a fresh position. Otherwise it is better to just book out and stay out.

Q: What is your take on this entire controversy which is plaguing Yes Bank at this point in time? It is not expected to have any sort of fundamental implication on the stock. But in general what would your view be on it?

A: We need to keep the basic issue aside and look at the fundamentals and I suppose if you are looking at the fundamentals I don’t see any reason as to why you should be exiting Yes Bank.

I think that controversy is going to continue for a while longer. I think it will be a good talking point. But I don’t think it will really affect the fundamentals as such.

Q: Even if this market does not see too much of a pullback rally from hereon, do you think that the worst is over at that 5,500 level, and maybe we may not breach that despite the bad news that continues to flow in?

A: No, it seems so because at closer to those 5,600 levels we have seen extremely good support. So, as of now we can surely assume that the markets would be in this range of about 5,600 on the lower side, and about 5,950-5,970 on the higher side.

In case we break on the higher side, yes, then I suppose the next leg opens up. But for that we really require some good fundamental news, which I don’t think will really be coming so soon.

Q: What would your view be on a couple of these high beta counters now? Would you be recommending taking a position because of the steep fall that we have seen in the likes of IVRCL and Nagarjuna Construction Company (NCC) at these levels now?

A: These stocks can move up further since there is momentum in the market, there is interest in a couple of these sectors especially infra. But then again don’t really expect a movement of more than 8-10 percent.

So, if that is the range one is playing with, I suppose one can take a view and buy now. But then I think one should be quick enough to exit that once you achieve those targets.

Q: I know fundamentally for a longer term not too many people are advising real estate stocks, but for the very shorter term with a trading perspective in mind, is there anywhere that you would put your money in the real estate space?

A: DLF would be one of those stocks where I could put my money now from a trading point of view as in the long term, we are slightly negative on real estate stocks and we expect a major price correction from possibly this month or next month onwards. So, I think this is a very short-term trade.

Q: Reliance Communications seems to be powering ahead. What is your call on Reliance Communications?

A: I do not expect this stock to cross Rs 95-100 levels, but then that is what normally happens when the market writes off a particular stock or a company and then they start performing. We have seen that in the past as far as Wockhardt is concerned.

We saw that move from Rs 400 to closer to Rs 1,750. So, it is very much possible that Reliance Communications can actually rise further. I will not be surprised if we could see Rs 145-150 soon.

Q: On Monday, Mahindra and Mahindra (M&M) reported another good set of numbers in the tractor segment and we have seen Escorts move from strength-to-strength because of solid tractor sales as well. Would you pick up or would you accumulate either of these stocks because of the trend that we are seeing in the farm equipment segment?

A: M&M surely has been our pick for quite a while and especially after these numbers, which have come out, we can be quite sure that that will continue for a while longer.

The way the monsoons are going it is very clear that tractor sales are bound to improve. So, M&M is surely a choice right now.

Q: Which company would you possibly lay your bet on in terms of a possible banking licence hopeful, considering Monday is the last day of the applications?

A: In fact we have been saying for a while that it is possible that Larsen and Toubro (L&T) Finance could be one of those hopefuls and I think that is one company where the banking licence could be allocated.

Q: What about something like Sesa Goa, because that stock is down close to around that Rs 148-odd levels. Do you think you would chip into this counter given that majority of the bad news is out of the system or would you just stay away till operations stabilise?

A: I think unless the operations stabilises and the controversies are out of the way then it does not make sense investing even at these levels. The way we see it, there could be some further downside.