Go short; enter ITC, RIL with long-term view: Experts

The BSE-Sensex ended the day at 18,540.89, down 233.35 points while the Nifty closed,  down 77.40 points. at 5,590.25. Sudarshan Sukhani of s2analyticals says that the market is in a downtrend. "The market is entering a strong support zone of 5470-to-5550. Investors should maintain short positions tomorrow and the day after and start booking profits. The market will eventually breach 5,500."

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Ambareesh Baliga of Edelweiss maintains his view that the time is not right to invest in the market. "At best, investors should stay out if they can’t go short. The support of 5600-to-5650 has started to break and a new support level has begun to open up closer to 5400-5420. So, it is a time for investors to stay out due to continued institutional selling. This weakness will continue for a while."
As the number of companies in the race for a banking licence is on the increase, Mahindra and Mahindra's financial services arm announced that it has withdrawn its application. SP Tulsian of sptulsian.com hails the move. "NBFCs  will not be able to mobilise enough funds in the near-term to maintain the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) as stipulated by the RBI . Out 30 applications, the RBI may grant about licences to 10 NBFCs."
Heavy institutional selling was witnessed in stocks such as HDFC Bank and ICICI Bank. Ambareesh Baliga explains that weakness in the banks, realty and capital goods, to a certain extent, will push the market lower. "But at the same time I will not be surprised if some of these richly-valued sectors like pharma start to crack." ITC's YC Deveshwar sold 10.7 lakh shares in the open market and that sent the stock down by around 3.3 percent. "YC Deveshwar may have sold stock to fund the purchase of a property in Delhi priced at about Rs 100 crore. This is just a need-based profit-booking by YC Deveshwar and should not be taken as a negative view on the stock, " says Tulsian.
The flash floods in Uttarakhand forced JP Power to shut down its power plants in the region. This caused the stock to fall by 14 percent on the bourses. Tulsian explains that this news coupled with concerns regarding the debt in the company’s books and the prospects of plans to add thermal power capacity caused the stock’s steep fall on the market.
The government has announced plans for a 7.64-percent divestment in National Fertilisers (NFL). Tulsian adds that the government is keen on divestment in around 10 PSUs to comply with the minimum public shareholding norms by deadline of August 8. "Though there is no fundamental reason for the stock to really fall as the company has a market cap of close to Rs 1,800 crore and little debt on its books. But the stock will keep correcting. I won’t be surprised to see the floor price getting fixed at about Rs 30."
Tulsian holds a negative view on gold companies and their movement on the bourses during the day. "Most companies are struggling due to pressure on working capital as the non-fund based facility with 180 days of credit has been terminated by the RBI. The next factor that continues to push these companies deeper into the red is inventory loss. Most of these gold companies have a considerable inventory of jewellery as the appetite for jewellery has slowly started to recede."
Regarding bets on defensives, Baliga says that even defensives like ITC or Godrej Consumer could dip if the market falls further. "Investors keen on investing in a market like this and do not mind taking a 5-10 percent cut, could enter stocks like ITC, Reliance and L&T."
Bad news continues to plague Ranbaxy. According to latest reports, the US FDA has placed the pharma giant's Mohali unit under observation for alleged violation of manufacturing norms. Tulsian advises investors to wait till the there is confirmation that the negative news has come to an end.