Ambareesh Baliga of Karvy Stock Broking believes now is the time to book profits. He believes the markets will be a bit volatile once the earnings season starts because the expectations are already quite high.
He prefers to be stock specific, if he has to invest at the moment. But giving a general view on the Index, he says he would be much more comfortable to invest, if it possibly falls 800-1000 points from the current levels.
Excerpts from CNBC-TV18's interview with Ambareesh Baliga:
How do you see the markets in the next few days till Infosys speaks?
It is possible that the markets could touch the earlier peak and possibly even surpass that, but then again instead of taking a call on the market as to where it will go finally, the call, which we are taking, is that we should be exiting at this point of time.
That is exactly what we have been doing for the past couple of weeks and we will continue doing that. So our call is that we need to book profits.
What has your retail crowd has been doing with the midcaps through this week?
Basically the momentum players have been getting in and out of most of the midcaps. They are making some money here and there and exiting. But then, I hardly see too much of investment activity, people who could possibly take one-two year point of view, are not exactly buying at this point of time.
Have you got to the bottom of VSNL's story; is there something in for current shareholders of VSNL?
Since we don't track that very closely, we have not really looked at the property part of it.
How is the general mood as we step into earnings next week?
I think it is going to be a bit volatile once we step into the next week because the expectations are already quite high. Let's see how Infosys delivers, because I think that should be the first thing to watch out for, which will decide as to how the markets will move.
Going ahead, before the next two-three weeks, even our expectations are quite high. In fact, we are expecting a 7% QoQ growth for Infosys. So in case these are not met by chance, then I think there could be decent fall from these levels.
What about oil, do you think this is the breakout for HPCL and BPCL finally?
Possibly, but then again a breakout for HPCL would mean possibly a Rs 25-30 move. I think beyond that it will be a bit difficult. If we are assuming that oil could possibly look at about USD 52-54, then yes, around Rs 343-350 is possible for HPCL. But beyond that I doubt.
What is the decent fall, when do you start putting back all that cash that you are sitting on?
I think I will be stock specific and start investing. But giving a general view on the Index, I would be much more comfortable to invest if it possibly falls 800-1000 points from the current levels.
What did you pick up from the grapevine because people got a bit worried over the last couple of days looking at those FII sell figures? Did you pick up any talk of selling from hedge funds as such?
Yes, in fact these rumours have been there for quite a while, especially for the last fifteen days to three weeks that couple of hedge funds have been having a problem, because of the commodity cycle and they could have gone wrong on the commodity cycle because of which selling could come in. I think that has proved to be true to a certain extent.
What have you been doing with your holdings in commodities like metals?
We don't have any holdings in commodities, but we do have commodity stocks in the portfolio, where I have been booking profits over the last couple of weeks.
Any midcap stocks that you are pushing before the earnings come in, where results are likely to surprise and therefore you would ask your clients to bank upon?
We had come out with the list with nearly 37-38 stocks. And we have been telling our clients to keep the stock list ready, but don't buy right now.
Possibly the upside is quite limited, it could be around 5-6% in case the results are good, but at the same time since our view is that the markets should start tanking after that, it is better to buy at lower levels.
Don't look at the 5-6 per cent you make right now, but possibly look at buying at lower levels and make that 30-40% over the next six-nine months.
What is your call on D-link?
We have been positive on D-Link for a while. In fact, we had started picking up D-Link at Rs 65 levels. But at the current levels, we have booked some profits.
Over the longer-term, if you are looking at the next nine-twelve months, then looking at the sort of growth, which is happening in that space, we are looking at a price close to Rs 135-140 for D-Link.
Are you recommending anything from the midcap IT space?
Nothing as of now. Since we have Infosys, TCS and Wipro on our buy list, we are ignoring midcaps for the time being.
What would you say about the excitement on Archies in today's market?
I really don't know what is happening in Archies. Possibly it is because of the festival season that there is expectation of demand going up. That is possibly taking it up, but then I don't know what is happening in this.
What about Bombay Rayon?
I don't track Bombay Rayon, so it is difficult for me to say anything on that.
What about Mirc Electronics and the kind of moves that the counter has been making over the week?
When this stock was at Rs 20-21, I had said that if I hold this stock, I don't think my neighbour will envy me. But the way the stock has moved, possibly yes, I think the neighbour would envy me now.
Is it time to start looking at the spaces that are moving today, textiles and fertilizers and chemicals?
I think people are looking at the stocks, which have not moved. Possibly in the sectors, which have not moved, I think some money is pouring in because very clearly it is rotation that has been happening.
People had made good money in the past month and a half to two months in a couple of sectors. So basically the money is moving from those sectors to the sectors, which have not moved.
Have you done any in-house study of the Tata Steel story actually going out and grabbing Corus?
Yes, I think it is a good story, but I really don't know tactically whether they will get through or not because there is going to be competition there from the Russian majors.
So I think we will have to just wait and watch. But for the time being, I think it is a decent story for people who have bought it possibly a month - month and a half back, to exit.
Apart from IT, have you done a checklist of the hits and the misses this time in terms of earnings? Any sectors you are a bit wary of?
We are wary of the two-wheeler segment, where we have been saying that the margins are under pressure, which was very clear from the last quarter results. So I think that will continue even in this quarter.
So I think the two-wheeler stocks, especially Hero Honda would be under pressure. Also, one again needs to have a re-check on hotel stocks like Hotel Leela, which could be under pressure. For Hotel Leela, I think like the Bangalore tariffs are already at the peak and going up more from there would be difficult.
So I think one needs to keep a close watch on hotels and two-wheelers. Again in the IT sector, the expectations are very high, so if that is not met, then I think there could be a reversal out there.
Are you impressed with the performance that cement has been showing all this while? With the kind of advanced tax numbers that Gujarat Ambuja Cement and ACC have reported, are you advising clients to take a closer look at them?
We have been buyers in cement for a while and we continue holding on to our stocks. This is one sector where we are not really recommending people to sell out because the dispatches are much better and the margins too would be much better as far as cement companies are concerned.
I think this will continue at least for the next fifteen months to eighteen months. So I think this is one sector where one can still hold on and buy further, if there are dips.
Any call on sugar now?
For the last three-four months, we have been taking a contrarian call on sugar asking people to buy at lower levels. In fact, we have been buying and holding onto stocks like Balrampur Chini, which had not had that much of a good move, possibly a 10-15 per cent move from the lows. But we have a target of Rs 140-150 for Balrampur Chini and I think this should be achievable over the next six-eight months. I think sugar is a decent contrarian buy even at this point of time.
Have you taken a look at Zee with the demerger procedure happening?
Yes, basically it is a demerger story and I think there would be overseas placement also, which have already been announced or possibly they are announcing. So I think a move of around Rs 40-50 from here should be possible as far as Zee is concerned.
How are you feeling about not just steel, but also what aluminium might deliver and even the big copper movers?
I think aluminium and copper; both should do well over a period of time. So one should be a buyer at dips in both aluminium and copper.
But compared to copper and aluminium, we are more positive on steel. So that space will be our first pick and after that, we will be picking up Hindalco and Nalco, but at these levels, I will be a bit skeptical to do so.
Tea as a space has been quite insipid today. What would you read into it? What they can deliver in Q2?
We have not really been tracking tea very closely, so it is a bit difficult for me to say exactly what tea will deliver.
But we have been utilizing this opportunity to exit whatever we have bought in the midcap space overall in recent past, that is in the last three-four months.
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