Strong Oct rally expected; Bet on SBI, Axis & L&T: Experts

A few days ago, Sudarshan Sukhani of s2analytics.com, suggested that if the markets held on to the levels of 5,680-5,700, there could be a strong rally in the October series. Sukhani explains to CNBC-TV18 the initial trends for the October series and the kind of range that the Nifty would hover within.

"Even if the market does not hold, I suggested that there would be move towards consolidation and there wouldn’t be any corrections at all. But today’s market has indicated that it will not stay below 5,680 and will go lower. That does not change the forecast for October which suggests that the market should make an attempt to cross 5,800 or even 6,000. I expect a strong rally in October unless things change. The range then is somewhere between 5,550 and 6,000."
Market analyst Ambareesh Baliga adds that investors should be picky while choosing stocks and buy only on dips. Baliga's picks include SBI, Axis, L&T and BHEL. With USL's stake-sale to Diageo to be finalised soon, the market analyst advises investors to hold on to the stock for the time-being. Below is an edited transcript of Ambareesh Baliga's analysis on CNBC-TV18. Q: Where do you see the series expire this time around?
A: I have been bullish on the markets for while now. But since the markets moved up too soon, too fast, I think a mild correction is overdue. But this correction could be either downwards or sideways and because of this I feel that the expiry could be at the same levels of 5,650-5,700.
If you are talking about the next couple of weeks beyond October, I think we should see the markets settle closer at the 5,900-levels. Q: Would it then be prudent to advocate a stock-picker strategy in this market considering that there has been such a strong run-up on the Nifty itself?
A: Absolutely. One should be looking at picking stocks and also buying only on dips. This will not be a one-way street. There will be some corrections in between and investors could utilise those corrections to buy in. Q: What stocks are you looking at right now either from the beaten-down segments or the outperformers?
A: I don't think there are too many beaten-down segments especially after the rally in capital goods, infra, a few metal stocks, auto and banking. My picks again are from these sectors. I will look at buying into capital goods and infra and banking, but only on dips.
My picks would include SBI, Axis and L&T which has been my favourite for a while. Though the stock was at a new 52-week high, there could be a correction of Rs 50-60. However one should look at buying closer to Rs 30 levels. BHEL looks attractive closer to Rs 228-230 levels which it reached two days ago. Q: Regarding BHEL, is there a fundamental trigger of any sort or is on a technical rebound from the Rs 197-level it reached in early September?
A: Fundamentally, the likelihood of debt-restructuring in the power sector and the expected improvement in the order-book could be the key triggers. Secondly, the share had a technical rebound as it recovered after falling to Rs 195-197 from Rs 230 in a very short time.
_PAGEBREAK_ Q: What could the extent of this downside be in case there is a reversal at this point?
A: I don't see a downside that will be more than 100 points on the Nifty after the sort of move the share made with a correction of 100 points, which is not very big I don’t see levels below 5,600, but I suppose the expiry should be anywhere between 5,650-5,700. I will be surprised if the expiry is closer to 5,600. Q: Any sort of strategy which you would recommend on something like ONGC which is down 2.5%?
A: ONGC moves only in a specific band of Rs 40-50. So, clearly investors needs to exit at the higher end of the band of Rs 295-300 and buyback at the Rs 260-265 levels. Q: What is your view with regards to the political developments since Friday? Do you think that the worst is over?
A: The worst is over at least for the time being. I don't think any political party wants elections right now, so I suppose we are safe at least for the foreseeable four-to-six months at least till the Budget. And because of this I feel that this rally could possibly continue for the next four-to-five months - at best upto December-January 2013. Q: What is your estimate of this quarter's earning season?
A: I have been cautious for a while especially on the big boys of the IT sector . I do not see them showing results that will be much better than the last quarter. I would look at selling out before the results. Q: What is your view on the United Spirits deal and the possible finalising of the deal with Diageo?
A: Hopefully, the deal should be finalised this week. I expect the share to close at about Rs 1,200 or so. Investors should just hold on to the stock for the time-being.