Although the Nifty has shown a smart pullback in the last few days, Prakash Diwan, Networth Stock Broking says it will probably see a retracement from the current levels, "It may go back to 5,400 in sometime, not immediately, but maybe in the next 15-30 days."
Realty, telecom and metals, he says, will probably weaken the Sensex and the Nifty more than any other sectors.
However, he is positive on the IT sector. “IT will become a defensive safer play as compared to others.”
Q: We have seen the market come back to where they were last Wednesday or Tuesday back to the straddling 6,000 mark. Do you think that there is enough steam left to cross this 6,040 to target 6,300 or do you think this should be profit taking time and valuations are already looking little dear?
A: I think the market is pretty laboured, the way it is crossing the 6,000 mark. So, it’s not going to be very easy task for it to go all the way to 6,300 definitely. But possibly if there is some sort of momentum on the back of positive flows, news flows, it could go all the way to 6,070. But there is a topping out which is very eminent there as well. So, while I believe you will probably see a retracement from these levels, maybe back to 5,400 in sometime, not immediately, but maybe in the next 15-30 days.
Q: If we do go back to 5,400, whatever the probabilities are for that, which stocks in the Nifty are looking exceedingly weak perhaps at the 6,000 level which might crack?
A: It’s typically a huge list of stocks which don’t look very strong. So, they could be susceptible to any kind of shorting or some sort of serious profit taking, particularly realty would given in very easily because the comeback has been fairly specious, it’s not very tenable at these levels.
You would also see telecom go through a bit of volatility and hence unfavourable move downward. Metals maybe, but not as severe as other two. So, I believe these three would probably weaken the Sensex and the Nifty more than any other sectors.
Q: What about banks, they spearheaded the rally in September and early October? They have taken a badgering which one never expect probably some of it was unexpected news, but is there a fundamental wobbliness and you would rather take profit when the market gives you a chance?
A: Yes certainly. We believe State Bank of India for e.g. could again react downwards if some profit taking happens. There should be logically some profit booking at these levels, even Axis Bank is looking pretty weak at this juncture. These are the banks which had sharp run-up and they also are finding it weak to continue growing in terms of credit because that’s not looking very great, especially with realty and a lot of other sectors under the scanner at this point in time. So, where is it that the banks are going to finally grow from? That’s where the midcap and the small banks might score much better from here as compared to the larger ones.
Q: What about ITC? It’s been an outperformer, it’s showing strength. Today it’s dipped on account of that news that we have got. Should one use this opportunity to buy perhaps it will get resolved soon because the government is also involved now?
A: I think it’s a bit of an overreaction, more out of sentimental reason than fundamental because for that Rs 18,000 crore tobacco business a four-day closure and that too a planned closure is not bad a news.
ITC is of course facing a bit of competition from new brand launches which are eating away into its market share, especially for its flagship brands like Gold Flake and all. But I am sure they will overcome that and it’s a well integrated diversified business where other revenue streams also could start chipping in. So, I think it’s a great story. FMCG in any case is a great sector to be in these times and ITC would be one of the best picks there.
Q: Where do you hide, if you are thinking that there is macro level, some kind of weakness in the stock market, stockwise is there relative outperformance?
A: You distinctly have IT which is looking up, especially the frontline largecap players. If you look at the job data, which has just come through last couple of days from the US, there is growing optimism that things possibly are not as bad and the recovery is possibly on its way. Given that the stand of the US government towards Indian IT companies in terms of taking on some of these projects and contracts would probably soften in coming January that could mean, and of course you also have the advantage of the rupee dollar favourable situation continuing for almost entire quarter this time. So, the frontline companies are pitching in for contracts, the pitch is very strong. They have given an indication that they should be getting some decent size contracts in January. So, IT will become a defensive safer play as compared to othersCourtesy :Moneycontrol
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