Midcaps, smallcaps in focus; like IRB Infra: CK Narayan

In an interview to CNBC-TV18, CK Narayan of Growth Avenues shared his views on the market. He also spoke about the action seen in momentum stocks.

The momentum stocks have got support from strong Nfity levels. One could see it headed to 8600-8650 levels, says Narayan.According to him action now seems to have moved to the midcap and smallcaps with the long-term investors shifting their focus into them. So, the current market trend is on the long side, he adds. Stock specific, he says as long as the trend in banking sector sustains there will movement in smaller banks like IOB, Allahabad Bank, Andhra Bank but positional players can stick to State Bank of India. There is still upside of a few 100-points left in SBI, he adds. It could go to as high as its previous high of Rs 3500. One could also look at stocks like IRB Infra, Havells India and ADAG pack.

Below is the transcript of CK Narayan’s interview with Anuj Singhal & Sonia Shenoy on CNBC-TV18.Anuj: Yesterday we had a bit of a breakout and today we have seen the markets actually consolidating again. Was yesterday bit of a false breakout or do you think it is only a matter of time now before Nifty heads out to see 8,500 or so? What is your call on the market now?A: I would tend to think it is bit of the later of what you said. We have been having a series of breakout to the upside in all sorts of stocks small, mid and large all sorts of stocks were having and sustaining upside breakout so clearly the momentum the trend is everything to the upside. Today it was like we did have a decent start in the morning but then somebody probably off the switch on the momentum side for the day and we have spend the day largely consolidating. However the key point to note is that there has been virtually no price damage during this phase of consolidation which only goes to suggest that not too much of leverage or positions are there to really hold up the trend in any manner.So, my sense is that people are trading long but they seem to be little nervous about holding on to positions. They are getting in and out of positions pretty quickly. Those who are playing the slightly longer-term cycle in momentum have all moved to the small and midcap space where sufficient amount of action and sustain momentum run is actually yielding much better profits. So, a considerable amount of actions is actually shifted to the small and midcap space which is probably why you are seeing much better returns come out of those areas who were the last several weaks.However that area of the market needs support from the main area of the market and the Nifty seems to be going great guns, it has pushed in to a new high. I see no reason why it should not head out to about somewhere around 8,600-8,650 during this run.

Sonia: What is the sense you are getting about how to trade some of these Public Sector Undertakings (PSU) banks now, what would your top pick be? Would it continue to be names like State Bank of India (SBI) and Punjab National Bank (PNB) or would you even look outside the index to trade?A: PSU banks now with the trend kind of sustaining in the banking space smaller banks like IOB, IDBI; IDBI of course is not among that list but the smaller banks, Andhra Bank, Allahabad Bank are also picking up some trends but then you have to actually differentiate this. The type of players who get into those kind of stocks are clearly the smaller retail players. For them even though State Bank would definitely present a much better trading opportunity even. They still prefer to go into the IOBs and Andhra Banks of the world.So as long as a trend in the banking sector is sustained there will be some movements in the smaller PSU banks but I would say for a little safer trading, a little positional play as well I would chose to stick to State Bank which has actually set off very positive signals post the announcement of the results and something like a few 100 points run is definitely on the cards in State Bank. It would not surprise me at all to see State Bank mount a challenge on its previous high of Rs 3,500.So that is the kind of move one should go for but if, let’s say, Andhra Bank and IOB floats your boat by all means trade them because the leaders are up and running. Bank of Baroda is up and running, PNB fared fairly decently today. So in the wake of those the smaller ones will run. So, you can take your pick, there are many vehicles who run with this.Stay tuned for more