Post ECB meet, 5200 good base for Nifty: Tata Investments

The BSE Sensex rallied 325 points to 17,670.91 on support from global markets. Currencies too strengthened against the American dollar; the Indian rupee appreciated 26 paise to 55.40 to the US dollar and Euro moved up 0.3% to 1.267 to the US dollar.

The NSE Nifty climbed 97.30 points or 1.86% to 5,335.70, led by broad-based buying. The Realty Index surged 2.8% followed by gains of 2.6% in Metals and Capital Goods indices. Auto and Bankex jumped over 2%.

Sudarshan Sukhani, analyst, s2analytics.com said that we took our profits in the morning and surprisingly the market held on and consolidated. He has reinstated long positions and increased the volume.

Below is the edited transcript of Amit Dalal, ED, Tata Investment Corp interview to CNBC-TV18.

Q: How long do you see this particular party lasting?

A: The manner in which Draghi has aggressively positioned the ECB, I think it has done its bit in moving the market up. A good and important factor is that 5200 has become a very good base for the market. Now, for us to see a further rally or even cross the 5400 which is the magical number for traders depends on how we see things panning out back home.

Q: Do you think that we will be able to push through Rs 4 per litre diesel price hike or will it be the same story about politics affecting the decision once again?

A: It's very difficult to say whether the government will be able to push price hike of diesel or not but it makes a lot of sense in terms of interest of the economy and governments fiscal situation.

Their own call in terms of how they would like to take the Opposition and Oppositions views again on this issue is something that the government will come across with. I think it would be very meaningful for the government to try it once and then see how the opposition behaves because if the opposition behaves in a completely irrational manner maybe they could get some brownie points out of taking an action which is considered by most that it is the right way to go.

Q: Do you think because of the Opposition noise that the government is reluctant to move ahead or do you think its own allies and even more damagingly lack of consensus within the Congress party that they are unable to move forward with diesel price hike?

A: It is difficult to say but definitely the paralysis is across the board. It is not only the diesel price hike which this government has been surrounded with. In this case I think whether it is Rs 4 or Rs 2 they do want to do diesel price hike.

I just think that they don’t know whether they have the political platform to do it but if they had to take a action which is brave action which makes them look like they are doing something the time is now and perhaps this is the best place to do it because there is enough consensus across the board that it needs to be done.

Q: Five months back S&P cut India’s outlook to negative and came out with downgrade warning. Do you think now that government has not moved on any kind of reforms, etc it’s just a matter of time before India gets downgraded to junk status?

A: We hope that doesn't happen and the finance ministry has already said that they are going to play host to the credit rating agencies and convince them that we have a better picture to draw in front of us. That could be not only just the ministry doing a little bit of talk but even support it by something.

The amount of liquidity that has come in is the only thing that has brought this hope lined up and one should remember that that liquidity has come in far more uncertain times then now. At least now we see the government or the change in government attitude towards wanting to do something.

For the last six months when liquidity came in it was when there was true paralysis and we even had GAAR as a big sword hanging on our head. So, it's a very strange situation where to be negative in this market is perhaps not the right place to be.

Q: How would you make changes or what kind of changes would you make in your portfolio at this level in order to be in sync with the global rally that we are seeing?

A: I think the leaders of the market are already known. Stocks which might have corrected because of the weakness in Europe should be looked at more favourably now. We should also continue to look at export-oriented companies and pharmaceuticals is one of my favourite.

Infrastructure is quote, unquote government story where the government wants the country to go, whether it wants to create a platform which allows more investment to come in or not, so until that is clear I don't think it has anything to do with the western hemisphere it has to do more where we stand.

I remain positive on oil and gas. I think the stock which we are seeing off some movement in Reliance. Shale Gas is a big story that is coming up in the United States. Reliance is the only company which has invested USD 3.5 billion in Shale Gas. People tend to ignore that stock or have ignored the stock for a long period of time because of its own issues. I think it should not be ignored anymore.

I remain optimistic on power sector where the government is concerned. I think the discom balance sheets have to be reformed. The Shunglu committee report has to be put in some form and that should finally help banks. At some point we will see all this happening in the next 4-5 months but how and when is not known.

Q: Is there anything in the beaten down metal names that you would buy at this juncture or do you think the regulatory hurdles, etc could pose a problem for companies in the metal space?

A: Hindalco has fallen a lot, so one can have a run back on the price but I don’t think it's the domestic government problems which rule as the biggest issue with regards to their prospects it's the Chinese slowdown and the fall and the demand for commodities in China and that's the major cloud above the heads of all the fundamentals of these companies.

Coal India, is the only company which seems to have a right mix because they sell coal at a much lower price than global and they don't have the same issues coming up in terms of production. On the contrary there is now more and more pressure on them to increase their volume, dispatches so maybe there could be some revenue upside coming from volume increases in that company.

Q: What would you do with something like BHEL now that has come back to its 52 week low – is this a good buying opportunity in the stock or would you stay away?

A: I think it is still dangerously position in terms of its fundamentals. The company itself is a little more positive than it was about six months ago. Wherever they have made presentations they are talking about a larger order book coming their way in FY13 or from hereon till FY13 than they got in the last 1-1.5 years. So the last number added was against its order book increase of 3 gigawatts.

Next year they are expected to be about 13 gigawatts. I think the price has definitely reached a level which makes value investing that one should look at in BHEL. In terms of prospects there is time in terms of a turnaround but with the government wanting divestment you may just hear some positive news coming from the government in context of BHEL.