Nifty 8,000 or Nifty 9,000? Split chance for either, says Citrus

The market is placed at a position where there is a 50:50 chance that Nifty can swing both ways, according to Sanjay Sinha, Founder, Citrus Advisors. Nifty could touch 9,000 or fall to 8,000 levels again, he said.Earnings performance of IT and banks sector will have to be closely observed to get a sense of Nifty performance, Sinha said. "If we don’t have shockers in the June quarter results then I think the possibility of the market now breaking that 8,600 barrier is quite likely," he said, adding that the passage of GST Bill will only add tailwinds to the rally.Below is the verbatim transcript of Sanjay Sinha's interview to Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: It’s been a one way rally for our market, what next? Do you think it still good time to buy or are you tempted to advise booking some profits now?A: I would say that we are placed at a 50:50 chance at the Nifty either racing to 9,000 points or maybe touching 8,000 points once again. The key trend decider in my opinion would be the quarterly results from the banking and financial space, because two significant sectors which could have impacted were IT and banking. IT the major results from Infosys and TCS has come in and gone and I think by and large the market has discounted that reasonably well. The last few months has seen a scorching rally in the banking stocks and this rally seem to be suggesting that there will be some abatement of the non-performing asset (NPA) pressure that we have seen from the banks and we will not see any shockers. God forbid if we don’t have the shockers in the June quarter results then I think the possibility of the market now breaking that 8,600 barrier is quite likely. The passage of the goods and services tax (GST) bill of course will add that strong tailwind to that rally.Ekta: But the two examples which have come out from the NBFC space LIC Housing Finance where the commentary has been cautious about some analyst assuming margins have possibly topped out at these current levels. Gruh Finance were asset quality has worsened, do you think that maybe now there could be some amount of worsening in earnings or there could be a turn in earnings a little for the worst for a couple of these NBFCs which have really been the darling in terms of fundamentals?A: I would say that would be difficult to extrapolate the experience of these two entities to the entire NBFC space. The last two years have rewarded the lending to the retail sector more than they have rewarded the lending to the corporate sector and that is precisely why you have seen that the NBFC have done quite well compare to PSU banks.Going forward I think we also have an event in the near future which is the award of the Seventh Pay Commission. I expect that with the enhancement of the PSU salaries one of the key things that we get a fillip will be the housing sector, because gone are the days when we used to buy houses from our savings, we always leverage and buy. The increase affordability in the hands of a large number of PSU bank employees plus the incentive that they get by way of substituting the HRA for their own accommodation, I think it is going to add that amount of extra demand for the middle class housing space. On that count these two companies that you mentioned they have an exposure to the housing sector, but I think going forward I would not be so cautious on this subsector within the NBFC as probably these two results seems to be suggesting.Anuj: What about Infosys is this a buy for you now after the kind of decline that we have seen?A: I think contrary to whatever has happened in the pharma space where the regulatory concerns were something which was tactical in nature in the sense that the impact was short term. I think what is happening in the IT space world over is more structural in nature. In that background between the first IT opportunity that came to India’s way by way of the Y2K opportunity and 2016 the IT companies have reinvented their business model number of times. I think time has now come to move their business models to be a little more realigned to the emerging realities of IT which is more focussed to the digital space, more to the cloud computing space so and so forth and on that I don’t think things are going to change overnight.There will be a time that all the IT companies will have in which to reorient themselves. This quarterly result has been a bit of a disappointment because when our expectations were also little elevated and because it has come in the background of Brexit, I think much of the focus has been on whether this is symptomatic of the impact of Brexit and the European Union (EU). I think what is more important is that overall the IT space is restructuring and I think we will probably see sometime in which the IT companies might be consolidating, the stock price performances may not be very sensational, but I think in terms of valuation trading at 12-15 times with an earnings growth of 12-15 percent and a very good return on equity, this will be one space which I will not vacate immediately.Ekta: Do you have any thoughts on the telecom space, the data price cuts that we have seen from the two telecom majors in the past couple of days and the incremental competition that we could see coming in?A: All this is in anticipation of the now announced date of Reliance Jio entry which is two months down the line. What everybody is trying to do is grab as much of the market as they possibly can before Jio makes its entry. In my opinion there are two sides to the same coin, one is these discounts might be helping them to grab certain amount of the opportunity, at the same time to expect that Jio will grab 100 percent of the market is also a misplaced opinion.In my opinion Jio is actually going to expand the market for the telecom companies offering on data and the other services that now come bundled with mobile telephony. So in the short term we could see some stock price pressure building up thanks to the discounts they are giving, but on the medium to long term I see the telecom sector as probably one of the better sectors to have in your defence play.Anuj: What about Hindustan Unilever. What’s your take on those numbers and the stock right now?A: The disappointment has probably got to do with the volume numbers not meeting expectations, but we have not seen the full impact of monsoon cascading down into the volume growth numbers. We can’t ignore the fact that the significant fillip to the volume numbers do come from the rural sector also, so short term maybe one can be cautious, but I think if the stock is weakening as it is doing post the results, this is actually going to be presenting an opportunity to buy because one of things you can take a very clear bet is on the aspirational play that India is now giving and too multiplied by a huge population is going to be a success story for most of the FMCG play and for an entrance players like HUL with a huge distribution set up supported by a brand. This is something that one cannot ignore, so it is a buy in my opinion.