Mkt may touch 6k; inflows, upbeat govt mood boost sentiment

Sudarshan Sukhani of s2analytics.com explains on CNBC-TV18 that he does not recommend any change in the strategy of maintaining positional longs advised at the start of the day's trading session.

"From the morning, the Nifty has rallied significantly as there is money in the trade. For day-traders, this is a very good time to exit. Positional traders can carry these positions and there may be some subdued movement on Friday or on Monday, it doesn’t matter. I think a target of approximately 6,000 is within reach in December. So stay for that."
Amit Dalal, ED, Tata Investment Corporation adds that consistently high FII inflows and an upbeat government mood have boosted and strengthened market sentiment. Below is an edited transcript of Amit Dalal's analysis on
CNBC-TV18. Q: Do you think the market can build on this new high for 2012 in December?
A: Yes, I think so. It is a strange coincidence that in both the United States and India the legislative bodies are on the threshold of taking major decisions which have been pending for a long time.
There is a widespread feeling that the humps and the problems in taking those decisions will be solved and that uncertainty present in the economy will definitely be reduced to a considerable extent.
The market sentiment is so positive that it has stopped reacting to news of scams and the related probes. This indicates that the market and the economy are heading for a better period of corporate activity. Q: Do you sense that participation is beginning to kick-in now with the way the Nifty is approaching that magical mark of 6,000 or do you think the retail crowd is still shy and today's volumes do not indicate that participation is finally beginning to come in?
A: If the retail participation were to become more aggressive and dilute foreign participation, I would be more concerned because the period for which these rallies last is very short.
For the last two days, I was a little worried because there was no strength in the rupee. Today was the first day when the rupee has slightly appreciated and that appreciation was necessary because the foreign institutional investors (FII) inflows are not that large and FIIs could be just hedging in the futures market.
I think the retail market is interested more in the mid-caps than the large caps. Of course, there are the professional traders who do take large positions and those traders perhaps are even more active on a day like this where the volumes are so large. But I definitely know that interest in mid-caps has started reviving. Q: What do you think could be driving this leg of the rally? Is it news of the Parliament session being more productive than expected or anticipation of reduced fiscal cliff problems that is leading global investors to buy?
A: I think we have to give credit to the global investors, they bought throughout the year. Irrespective of the uncertainties in their own markets and economies, and uncertainties that we saw throughout the first six months in India, FII flows have been larger in India than even most East Asian countries.
After Chidambaram took over as the finance minister, the inflows became even more concentrated. Going forward, I think it is not only going to be the promise that comes from the change in attitude of the politicians and the government in terms of what they want to do for industry and boost growth, but it is also perhaps a hope and a belief that country is reaching a trough in terms of the economic problems.
And if that is true, in terms of both the gross NPA and power sector problems, where I do not think the country has touched the trough and the trough is ahead of us, then the market may start looking a little ahead and be a little more buoyant based on the fact that the trough is just round the corner or maybe a quarter away. Q: How would you map or tie-in this kind of market performance with the fact that there have been constant and continued redemptions in the mutual fund space? Do you think local investors might be getting it wrong by taking out money at every periodic rise in the market?
A: If you just view mutual funds as one asset class, I think the redemptions were not timed right. But the other asset classes have outperformed so much in the last two years-  be it gold, real estate and fixed income- that the need to invest in equity was very low and it was not only a matter of loss of faith in equity, but just that there was more opportunity elsewhere.
I think, to a large extent, all that is getting capped now and perhaps there is some resurgence of confidence. But mutual funds are instruments where the following has to be mustered up based on performance. But equities, on their own, may see more participation. Q: Do you think it is a turnaround point for telecom?
A: I think there is a definite case to be made out for telecom because it did not have to go through an auction that could have completely destroyed balance-sheets and maybe the government has understood a need for a change in strategy. But definitely, the problems in the sector, such the kind of capex needed for the next five years, remains.
In the case of Bharti, the telco's plans in Africa are still not very clear. So I am not sure if you can easily and linearly look at it as a positive. But I think, yes, there is relief from the situation that the sector faced two months ago.