Positive on July series; short coverings to go on: Experts

Moneycontrol Bureau

The June Nifty series may have disappointed the street by ending down around 7 percent but experts are keeping a positive stance on July series, citing significant short covering seen towards the end of series.

"I am keeping my positive stance on July series for the simple reason that we have seen a good amount of short covering in the frontline stocks and that has made the Nifty to close around 5700 level," SP Tulsian of sptulsian.com said.

In the beginning of the month experts predicted the June series to surpass 6000 mark. However, sharp depreciation in Indian currency and Ben Bernanke's comments on rollback of quantitative easing led equity indices in to huge losses. Nifty today inched up 1.7 percent or 93.65 points to end at 5682.35.

Gains were partly led by global cues and on hopes of gas price revision by Cabinet Committee of Economic Affairs (CCEA) in meeting scheduled later today. Sensex also gained 323 points to end at 18875.95, and the 50-share NSE Nifty advanced 93.65 points or 1.68 percent to 5682.35, but the broader markets closed marginally positive.

Also read:Nifty may hold 5500 in July; sell on rise: Angel Broking

Several mid-cap stocks in real estate, infra stocks have seen major battering in past two weeks. Tulsian believes that short calls will not be repeated in such heavily beaten counters in July series.

However some experts advised to remain cautious, keeping in mind the washout just last week. "If they (indices) just maintain themselves at current levels, I would be much more comfortable saying that let us go and start taking long positions," pointed Sudarshan Sukhani of s2analytics.com.

Tulsian also warned that if there is excessive FII selling just as witnessed after US Federal Reserve meet then it may aggravate situation, however overall he remained optimistic on July series.

Tulsian is also positive on Bank Nifty which has lost 12 percent in June. He noted that although Bank Nifty has remained in pressure for whole of June, advance tax numbers of both private and public sector bank indicate towards better first quarter earnings.   

"I am not too sure about the asset quality for the PSU banks. That can be a bit disappointment but that won't be happening across the board in all the PSU banking stocks," he added.

Dipan Mehta of Member BSE and NSE however disagrees with Tulsian and recommends putting a pause button on acquiring bank stocks.

"You would see banks underperforming as against to them being in the leadership position a few months ago. I think they will be the laggards in the market. One has to also keep in mind that there is a bit of over ownership as far as the banking sectors is concerned especially within the private sector banks and few other private sector banks are looking at or have done equity dilution as well," Mehta said.

He believes that as the banking sector would see some amount of under performance market focus would shift export oriented companies like software, pharmaceutical and auto ancillary. "So, that reshuffling and shifting from one sector to another sector will be the theme at least for the next two three months or so," he adds. 

In July earnings season will start which will also provide direction to the equity indices. "I am sure it is going to be a very interesting earnings season not only in terms of what the performance of the company is as far as profit and loss (P&L) is concerned but what the damage is going to come through from various balance sheet issues in terms of ECBs or overseas borrowings," Mehta said.