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Market poised for pre-Budget rally, tank up: Experts

In an interview with CNBC-TV18’s Sonia Shenoy and Senthil Chengalvarayan, Jai Bala of Cashthechaos.com, Devang Mehta of Anand Rathi Financial Services along with Ajay Bagga of OPC Asset Solutions share their outlook on various stock specific bets and where the market is headed hereon.

According to Bagga, investors should continue to tank up backed by a pre-Budget rally and a divergence story on the macro front. He advises investors to build positions across auto, banking, cement, infrastructure plays. He also remains bullish on the IT sector despite a current bad quarter.

Meanwhile, Bala feels USD may weaken for the short-term, which will in turn benefit commodity and crude stocks. He remains upbeat on RIL and ONGC while shies away from Cairn Energy.

In addition, Mehta remains positive on L&T, Nagarjuna Construction Company (NCC) and Ahluwalia Contracts.

Below is the verbatim transcript of Jai Bala’s interview:

Senthil: What do you make of the Nifty now from here?

A: I think we are undergoing a complex correction and the Nifty within this complex correction could make a new high above 8626 and then come back to the lows that we saw around 7700 recently. So, this was going to be a tough negotiating process so I would rather focus on the broader markets rather than the frontline stocks. That way the trend there is much clearer and you could see some kind of volatility in the frontline stocks. So, you can negotiate the volatility that I am anticipating in the frontline stocks much better if you focus on the larger market.

Senthil: What would you pick from the larger market?

A: There are several stocks that are alluring at this point of time. You should have a focus of something like two to three months now that we are approaching the end of the calendar year. There are several stocks like Engineers India (EIL) which probably has put in a correction – completion of a correction around Rs 205 from a two to three months perspective. I think it looks like it can scale about Rs 334.

If you look at something like Mold Tek Technologies which you normally don’t track this has had a phenomenal run from the 40s to 180s. I think it is completing a good correction as of this week. Once the stock closes above Rs 123 this will scale about Rs 199-210.

Anuj: Your view on oil and gas stock and the index itself if you are tracking that that is being a big drag?

A: Last time we were on your channel discussing crude we had anticipated some sorts of relief may sure to come through for crude. That was quite weak and it does not materialise to the extent that anticipated but still the probability of much larger relief rally for the crude in the offline nothing has changed expect the structure is slightly altered. If you look at multiple asset classes however I look at it in the next few weeks the dollar is looking like it is going to weaken for the short-term. So that should bring in consider amount of strength into commodity stocks and crude related stocks. However, Reliance Industries is actually very interestingly poised if you look at it from a long-term perspective from the 2012 lows to the 2014 highs that exactly retrace 50 percent of the move. It is ideally poised for a good bounce from the Rs 860 odd levels provided that it holds. So we are going to be watching Reliance very closely for the next couple of days if it show some kind of strength you can have a short-term player coming out here. Cairn Energy is a complete avoid medium-term charts looks disasters here. It is better off staying away from this counter.

Coming to Oil and Natural Gas Corporation Limited (ONGC) as long it stays above Rs 307 the medium-term bullishness is quite intact. It is going to go close to the 52 weeks highs. So, I would like to maintain positive buys on Reliance and ONGC.

Sonia: As Ajay was pointing out he is bullish on some of the private banks, we have seen banks like Yes Bank, etc hit fresh highs every day. What are the private banks that you would recommend if at all to trade into now?

A: From a risk reward perspective banks are attractive creating fresh long positions but the Bank Nifty as such hasn’t had any significant correction. If I had to rank, I would rank State Bank of India (SBI) and Axis Bank at the top of the ledge. You asked about private bank, yes, Yes Bank and Axis Bank are looking good but they are not conducive for creating fresh long positions at the current levels.

I would wait for some kind of correction to come through in Bank Nifty and then look at these strong stocks which have outperformed in the last few days and then that will be the best method of controlling risk. If you are already long you can remain long but don’t create fresh long positions.

Sonia: If you had to do some crystal ball gazing for us and tell us where you see the Nifty at the end of 2015 what would your initial estimate be? When we started off 2014 the Nifty was at 6,300. Now we are at almost 8,300. What kind of move do you see in 2015?

A: That is a very difficult one but I will hazard a guess. The next couple of quarter is going to be bullish for the nifty but the problems are likely to arise for the nifty once we cross into the second half of 2015. My stand on the Indian rupee, I am very bearish on the Indian rupee that could cause a problem for the Indian markets. Once the realisation dawns on the larger part of the market that INR is going to record lows we should see some amount of selling come through the market. We could end up 2015 some where close the where we are but before that we could see much higher levels than we are at this point.

Senthil: Does your bearishness on Indian rupee persist in the phase of oil prices at where they are and what does the oil look like to you?

A: I treat each market on their own merits and the dollar index is set to scale much higher levels from a longer-term perspective. What we have seen is just the middle portion of the move for the dollar index. We will see a short-term correction come through for the dollar index.

However oil, there are two aspects to crude Brent, short-term there is a reflex bounce that is likely to come through and that could take Brent to somewhere close to 69/USD. From a longer-term perspective say something like a six months plus timeframe, hold on to your chairs Brent could take out the 2008 lows. That is where we stand. This has been our projections since March of 2014. This is not something new because Brent has come down 50 percent from June lows. We had this stand in March 2014 itself so that is where we stand on the Brent futures.

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