TCS, Jubilant long-term bets; short SBI, L&T: Prakash Diwan

Prakash Diwan of Altamount Capital Management told CNBC-TV18 expects the market head lower next week, but sees this as the right time to cherry-pick some stocks that could give a good valuation-based opportunity currently.

From the IT sector, he places bets on Tata Consultancy Services (TCS) and sees a six-seven percent rise in the next three to four weeks. He expects Jubilant Foodworks to sharply bounce back by Rs 100-120 from the current levels. Real estate stocks are likely to slide further next week as well, he cautioned. State Bank of India (SBI) and cyclicals like Larsen and Toubro (L&T) could see some downward pressure, one can short them. Also read: Lessons from stock market rally for retail investors Below is the edited transcript of the interview to CNBC-TV18. Q: What are you advising your retail clients to do now? Is this a time to be buying on every dip or would you wait and watch and expect the market to head lower? A: While the market, as reflected by the Nifty, could possibly head lower; there is an ample opportunity to cherry-pick some of the stocks that give you good valuation-based opportunities currently. As Mr. Tulsian was mentioning, the yields clearly indicate that the interest rate cut expectation in the month of June is possibly over as we have got deferred to July. So you would probably see a rotation from those stocks. People are moving into some of the other stocks which have clocked good numbers. Mahindra & Mahindra (M&M) is a case in point. You possibly have some of the IT companies that have got ignored, so you start seeing that. Of course we would look at buying into some news load driven stock like Sterlite and Sesa as well given the fact that Friday has been positively good for them. Q: If you had to give us just two or three stocks that you would either buy or sell as we head into next week which stocks would they be? A: We would take call on both sides, long as well as short. We would typically look at going long on IT. Tata Consultancy Services (TCS) particularly sounds pretty good in terms of valuations, not at all overstretched. From a tactical perspective a 6-7 percent upside could be had in the next three-four weeks itself. Jubilant Foodworks has been resilient enough in this entire carnage. We have not seen it move after the results, whatever happened, happened. But it is likely to show a very sharp bounce back, maybe another Rs 100-120 from here. On the short side, maybe State Bank of India (SBI) and cyclicals like Larsen and Toubro (L&T) could possibly see some sort of downward pressure continue. So those are the ones on the short side. Q: The biggest loser last week was the real estate index. We saw stocks like Housing Development and Infrastructure (HDIL) etc. fall 15 percent on the back of weak earnings. But within that space would you do any bottom fishing or do you think it is a complete closed case right now? Real estate should not be touched with an arm's length? A: I would not rule it out. But yes, given the weakness that persists maybe next week you could probably see it slide slightly further down and then start evaluating from a real estate perspective. Look at Sobha, DLF; two ends of the spectrum in terms of market cap. But some of them would start offering value at certain lower levels, maybe another 7-8 percent from here, but not currently.