Nifty to hold 5600; buy liquid largecaps on dips: Edelweiss

Atul Badkar, Edelweiss Securities expects Nifty to consolidate between 5,600 and 5,800 now. With the second quarter earnings season kicking off tomorrow, some volatility might creep into the market, but Nifty will manage to hold 5,600 levels, he said in an interview to CNBC-TV18.  

"If the Nifty breaches 5,800 mark, we will have that next 100 points move very quickly. The trend still remains bullish, a bit of consolidation before we move higher," he added. Indian equity benchmarks witnessed a volatile start today following a fall of about 400 points on the Sensex since the start of this week. The Nifty declined 8.25 points to 5,643.90. At lower levels, banking and capital good largecaps can be bought. "ICICI Bank and Axis Bank are good levels to accumulate on dips. You can look at L&T and BHEL at lower levels. Stick with more liquid largecap names, better stocks and good management," he suggested. Below is the edited transcript of Badkar’s interview with CNBC-TV18. Q: The October series has not begun very well, there is a mild air of correction, do you see that deepening as we wade deeper into the series? A: We have had a great September and if you see the current Nifty levels on the spot, post the September expiry we haven’t done anything. We closed at around 5,649 on Thursday and today we are at around 5,652, we may get a bit of a gap-up opening today, but my sense is that overall after the big move that we have had in the last few trading sessions, now it is a time for consolidation. We are also moving into a result season starting tomorrow with the big ones coming out. It will be a little volatile, 5,600 by and large should hold. I do not see it breaking that easily because if it does and there is a concern, you have those gaps that have to be filled in – you can all the way go down to 5,450 if that 5,600 mark is broken. I do not see that happening. By and large you will see the Nifty consolidating between 5,600 and 5,800. Once we cross 5,800, we will have that next 100 points move very quickly. The trend still remains bullish, a bit of consolidation is likely before we move higher. Q: If we do see a move lower, which are the stocks that you would go ahead and buy at lower levels now? A: It is good to stick with the largecaps. You have those two gaps to be filled below 5,600 and you can correct all the way to 5,450. In that scenario, you would want to be with the largecaps. Within the largecaps, I would like to stick to banking, ICICI Bank and Axis Bank are good levels to accumulate on dips. In the capital goods maybe you can look at L&T and BHEL at lower levels. Stick with more liquid largecap names, better stocks and good management. Q: How are you approaching infrastructure because yesterday it seemed lot of these infrastructure names actually saw some fresh short positions being built? A: That is right. Initially, we saw longs being built then we saw those longs being cut and fresh shorts coming again, which is why I would not want to go into infrastructure stocks immediately because we are at quite a critical juncture where if we fall below 5,600 levels, we can get that quick 3-4 percent downside on the index. That is quite unlikely to happen, but if that were to happen then you will see infrastructure stocks correct even more sharply. _PAGEBREAK_ I am happy to miss some amount of rally on infrastructure stocks especially, across the board, Nagarjuna Constructions, GMR, IVRCL and catch the rally a little later- once we know that we are comfortably consolidated and moving towards 6,000 very clearly. I will wait a bit. I would not want to go into infrastructure names immediately. It is safer to stick with largecaps, the more liquid names like ICICI, Axis, BHEL, L&T maybe even some pharmaceutical names Cipla, Lupin. It is also good time to accumulate some FMCG names if they correct because the incremental money that is coming in is continuing to move into these sectors. If the index were to cross 6,000 and even go above, you will see outperformance by infrastructure and real estate, but these stocks will move too. At this juncture, stay with the largecaps, a mix of defensives and banking. Q: JP Associates has seen an aggressive long built up in yesterday’s trade. Would you buy that stock now and where would you keep your price target? A: That’s one stock again in the entire infrastructure space where I don’t want to get into it immediately. If you want to look at the next two or three years where you want to value the assets on ground and you think you will see upsides over the next six months or one year, it does make sense to accumulate on dips over a period of time. But from a trading perspective quite honestly the entire infrastructure space immediately is something I would not want to do. Q: What is market positioning ahead of Infosys for CNX IT or the topline IT stocks? A: Coming to Infosys, the IVs on the upside calls and the downside puts was around 52-53, so what we are actually thinking of doing is looking at selling strangle, the 2,750 call and the 2,250 put. You are getting Rs 70 for that and immediately after the results, you see the IV settling down to around 30 level, so that’s an interesting punt that you can look at where you sell Infosys strangles. Apart from that, across the IT space we believe that Infosys will outperform TCS immediately. The run up for TCS over the last few months has happened so around Rs 1,320 or Rs 1,350 levels is where TCS can go. But if Infosys surprises us tomorrow it will not react immediately, but Rs 2,650 or Rs 2,700 over a period of time is quite gettable. Q: If we do see a flat opening what would your immediate strategy be for the day? A: If you see a flat opening, we just have to wait and watch a bit and look at how Europe opens. Wouldn’t want to take any compulsive trades at this point of time, but if you see the consolidation around 5650 and it moving higher towards the 5,700 levels then maybe you can take a fresh long with a target of around 5,740 or 5,750. But I quite doubt that will happen immediately. My personal sense is that over the next few days, you will see a little more consolidation, little volatility. Tomorrow we have results coming in so we are in a wait and watch mode, don’t do anything too aggressively at this point of time.