After attempting several times to break the key 8,700 resistance level, the Nifty managed to close above it yesterday.For Tushar Mahajan, Head of Listed Futures & Options - India of Nomura, the breakout means the index is headed for the 9,000 mark. Speaking to CNBC-TV18, Mahajan said that the leadership for this market will come from domestic-led segments like consumer discretionary, industrial engineering and oil & gas and not from global sectors like IT and pharmaceutical.Banks too will lead the growth: Bank Nifty could touch 20,800-21,000 mark even before Nifty reaches the 9,000 mark, according to him.The only point of worry, Mahajan said, is that the whole market is positioned on one side without too many hedges. "A reversal, if it happens, could be extremely sharp in such a scenario." Below is the verbatim transcript of Tushar Mahajan's interview to Sonia Shenoy & Anuj Singhal on CNBC-TV18.
Anuj: We had a remarkable August series. Market didn't do much and September has started on a bang and we have seen huge buying from foreign institutional investors (FIIs) in first three days. What are you making of this. Do you think we are going through an expansion phase again? Do you see market crossing 9,000 in this series or next series?
A: It looks like what we saw yesterday - the earlier part of the day, while it was trying to break out of its upper end of recent range, like you said for most of August it didn't do much, and once that break happened above 8,720 level, it was all guns blazing. You saw domestic institutions participate, you saw foreigners continuing to buy in and you saw huge amount of Futures lead Nifty index lead buying.
The right ingredients for breakout is what happened yesterday and this breakout does make us believe that we are going to get to 9,000 levels and that is what even the Options data currently points out with most of the open interest for this current series lying there at 9,000 levels. So you have got good tailwind with respect to global liquidity. Technically you have got a good breakout yesterday and no reason to believe that it won't get to 9,000 levels now.
Sonia: Where the leadership could emerge from in this market because with technology under pressure it seems like a lot of the heavy lifting will have to be done by the banks but what is your own prognosis?
A: That is where it is going to end up being that both IT and pharmaceuticals, the two so to say global sectors within the index are not going to be the ones who are going to provide leadership. It is effectively going to come from domestic stories. What better to play than the banks like you said but the other part of the whole thing is going to get lifted through consumer discretionary space; you will probably see some impact coming through industrial engineering kind of space and the oil marketing companies and the oil and gas space is going to provide the last leg.
So, it is the domestic lead stories and the energy space which is going to provide leadership to get to the next 200-250 odd points on the Nifty with the global sectors continuing to remain under pressure.
Anuj: For the Bank Nifty, what kind of rollover data have we seen and are you bullish on the Bank Nifty. Do you think it can still remain the leader for the market going forward?
A: The leadership will be provided by the banking index and my sense is that before we get to the 9,000 levels on the Nifty, you will see the Bank Nifty may get to 20,800 to 21,000 odd levels. So the Bank Nifty leadership is going to be followed by the Nifty in terms of the breakout and the ingredients for that move are all in place; you have got falling yields continuing to be placed, the pressure on the asset quality is known and been there in the price and you are only going to see better stories coming out of that space.
Anuj: Let's talk about some big stocks like Hindalco Industries; it's up 22 percent this month. We have seen State Bank of India (SBI) rally a lot and we have seen huge build-up of long positions in these stocks and SBI stands out. Do you see momentum continuing in some of these names?
A: If the banking index has to move, you will see SBI continuing to get on to this position. A lot of the rollover data across, especially the largecap banking space, has also been strong. So the momentum is in their favour and I would be surprised if SBI gets to Rs 300 odd level but maybe about Rs 280-282 on SBI is definitely something.
Having said all of this my only point of worry is that the entire market is positioned on one side; when you say names like Hindalco etc, also seeing huge amount of long positions being there, the fact of the matter is that there are very limited hedges being in place. So if god forbid there is a withdrawal of liquidity, I do not see any reason why it is going to happen but you never know with global liquidity and how global markets react. The reversal could be extremely sharp. It's just a caveat I am adding to the entire conversation.
Anuj: The other call which has worked well off late is buy banks but sell IT. Do you think IT has a bit of a consensus sell now? Do you expect short covering? Yesterday it rallied a lot from the 52 week low?
A: On the IT space on an absolute basis I do not know whether you would want to continue to see shorting, make your money because I think the space is going to largely underperform the broader markets. So as a portfolio hedge, this will work. However, to think that there could be further downside in terms of pure price point levels. I do not think we are going to see that kind of divergence from the current levels on the IT space. So it is a good portfolio hedge to have it as a short. There are limited triggers for it to either a short covering lead rally or a move up but on an absolute price performance basis, I do not think you will make too much absolute money on shorting the IT names from here on.
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