Nifty headed to 5800-6000 by Dec..!!

Fri, Nov 02, 2012 at 16:14

Hold positions; Nifty headed to 5800-6000 by Dec: Experts

Dilip Bhat, Joint MD of Prabhudas Lilladher is of the view that markets have good tailwinds at the moment. The overall bullishness has been supported well by global indices and FII flows continue to be strong, he believes.

Sudarshan Sukhani of s2analytics.com feels it is not an opportune time to go long on the Nifty. According to him, those who have already booked long positions must carry it forward to the next week, to Monday. He further added, "At the current levels the Nifty is now on the verge of strong resistance and that resistance comes at 5730. Let that resistance be crossed and that is the time to go in or maybe when there is a sharp dip one can enter the market. This is a time only to hold positions, not add to new positions." Dilip Bhat, Joint MD of Prabhudas Lilladher is of the view that markets have good tailwinds at the moment. The overall bullishness has been supported well by global indices and FII flows continue to be strong, he believes. 

According to him, the Nifty is heading towards an anchoring level of around 5800 to 6000 by December. However, in the meanwhile there could be some market volatility, he opined.

Q: Your view on where the markets are headed given the kind of painful raise we have surrendered ourselves to for so long?

A: The markets really are having good tailwinds at the moment. Globally also I think the global indices have been quite supportive of the overall bullishness. The FII flow continues to be positive, though they seem to be a little more interrupted at the moment in the last few days, where probably there are some negative flows. More importantly, there are some right kind of noises being made on the Indian economic scenario, whether it is the PM talking about a trillion dollar on the infra spend or whether it is the fiscal consolidation roadmap that the finance minister is talking about. 

Taking all this into account, I think possibly we are still heading towards an anchoring level of something like 5800 to 6000 on Nifty by December. There could be a good amount of volatility in the intervening period, but beyond 5800-6000, we will probably run into valuation headwinds. Probably the valuations will not be supportive beyond that and it will look too stretched. In the near term that is what it looks like.

Q: To break above this 5700 odd resistance mark quite concretely, what do you think is the next trigger for the markets?

A: Beyond that, probably there has to be a lot of conviction that GDP has to grow and grow decisively past 7-7.5 percent for FY14. I think there has to be some concrete measures. People will be focusing on it. Of course if that happens, the Nifty EPS growth will also look very healthy and very strong. 

Otherwise, a 10-12 percent or 13 percent Nifty EPS growth will not inspire a confidence to buy even at the levels of 5800-6000. Some of these things probably are still missing in the overall scheme of things. Maybe the steps which have been announced could only arrest further downslide. But, whether these will lead to a 7 percent plus kind of a GDP growth rate is not what I am convinced about. I am sure that market probably is also very circumspect about some of these things.

Q: Getting down to individual stocks, Wipro   is the big gainer this week. It is up about 9.5% for the week itself. What have you made of the demerger news that we got and what is in it for shareholders and do you think the time has come to book profits in the stock?

A: As far as the demerger is concerned, I am not sure whether there is anything great for the shareholders at the moment. Maybe it is more to do with the internal family kind of an arrangement because most of the time the markets have been focusing on the software growth, the RoEs and the cash that the software business is generating. 

By and large, Wipro has enjoyed PE only because of that and maybe the demerger, if at all, will be more of a formality than anything else. But, more important is the core earnings in the software. They have really started coming in a reasonably good way. Probably I think there is some amount of sustainability that one sees going ahead and maybe there could be some kind of growth. From that sense, I think Wipro still looks a reasonably good bet to go up by another 15-20% from the current levels.

Q: We have got some good numbers today from the PSU banking space. There is Union Bank   which is reacting quite favorably post its numbers. Any view on that?

A: I think Union Bank has really taken it on the chin up till now. This perhaps so far has been the only PSU bank which has shown an exception. Otherwise all other PSU banks have shown deterioration in the asset quality and that has been the single biggest worry. Here at least that worry has stemmed for the time being. 

Now probably to gain further confidence and momentum for Union Bank, people or investors will look at whether the asset quality is going to be maintained going forward or if at all it is going to improve. My sense is that Union Bank from here on probably will start showing a little better performance both on the asset quality as well as the NII growth. 

Probably that will result in a good bottom-line growth as well as a better ROE and ROAs. Union Bank, even from the current levels should be one of the few exceptions in the PSU banks where one should take a call and one should buy for short to medium term.

Q: Your opinion on the Jet Airways  numbers and what we have spoken about?

A: The numbers are not so bad, but there are 2-3 things happening in this particular sector. Some kind of pricing power seems to be getting back, that is point number one. 

The talk about FDI will also add a good amount of tailwind or momentum to this sector and particularly to stocks like Jet Airways or SpiceJet  . My call is, in the short to medium term may be this could show a reasonably good, about 10-15% kind of a movement on the upside.

But, on a secular long term basis, I don't think that airlines have generated enough confidence at any point of time that they can still generate good free cash and sustain its business on a longer term basis. Longer term is a different ballgame, but in the short to medium term possibly it can show a reasonable upside.

Q: A quick word on a couple of these big numbers that we have lined up next week, what would you watch out for closely? You have something like Tata Motors  , Bharti , SBI  , any positive surprises or even negatives that you would expect this time around?

A: SBI will be very keenly watched because they have had enough problems in the past about the asset quality and more importantly NIMs, which probably seems to be coming off from its pretty high level to what they are at the moment. Our analysts’ assessment is that the NIMs will come off and asset quality issue will still persists for some time to come.

So, how bad that is going to be is something which I think the street will be very keenly watching. There won't be any great positive surprise as far as SBI is concerned. Probably, SBI would react on the results and we would look to buy it at somewhat lower than the current levels at the moment.

As far as the other results are concerned, Bharti will be something which people will be very keenly watching as to how the ARPUs are moving and what kind of capex the company is talking about, how the cash flows are going to move because the capital intensity of the business has gone up for Bharti and for the telecom companies.

That's one stock which a lot of people have bought and its kind of a very core portfolio. That will be very keenly watched. I don’t expect anything great out of Bharti in this particular quarter, but the kind of outlook they are going to talk about is something which I will be keen to know. 

Ranbaxy is one of our favourite stocks which we will be keenly watching as to how the things are unfolding there. We are pretty confident that Ranbaxy is something which one should hold in the long term portfolio over the next 18-24 months.