Rajesh Jain of Pranav Securities says that the markets are moving up sharply and he expects new highs to come in September, or closer to Diwali.
He sees liquidity coming back into the markets and adds that if more positive activity continues, we will have a 'do not sell' market, and that is something to look forward to. (Check out how markets are moving: Markets trading strong: SBI, Zee top gainers )
Excerpts from CNBC-TV18's exclusive interview with Rajesh Jain:
How have you read the pullback or the strong run that we had, especially yesterday and how are we set up now for the next few weeks?
The only question mark that can perhaps linger in the mind would be related to F&O expiry, which is now around the corner. Essentially, what we see is some sort of imposed volatility because of large opportunistic trades that are undertaken by the deep pocket segments of the market.
Besides that, there is also some bouts of profit booking. However, this market seems to be on a major liquidity inflow binge. There is a lot of renewed interest from all segments of the market, which had got bruised in the May and June fall. People are once again waking up to the fact that this market could be moving up very sharply and indeed the markets are once again talking of a new high, perhaps in September and if not then, even just before Diwali.
So there is tremendous enthusiasm, liquidity is coming back, there is renewed interest from segments, which were hitherto silent after the May-June carnage and most importantly, there is renewed commitment.
If there is one or two more days of activity like the last three-four days, then this would once again become a 'do not sell market', the kind we saw in April and early May. Once this market becomes a 'do not sell market' sellers would disappear and largely fresh bouts of buying would keep the market going up. So this is the market to look forward to with good expectations but be careful of instant opportunistic activity.
What is driving Reliance right now, what do you think drove it like it moved yesterday?
The fact that the stock has delivered and the fact that it has come back strongly, I think it is the price movement of Reliance Industries, which is attracting the retail class in a big way and a whole host of speculator participation.
One hears of revaluation of oil assets, new gas finds or reassessments of gas findings, one is aware of the SEZ moves that the company is making, the retail foray and the Videocon development yesterday. I think there is a constant news flow but above all that it's an excellent trajectory that the stock has posted and the momentum that it has picked up, that is adding more and more followers to the stock.
I think aside of the fundamentals, it is the momentum that is intrinsic in the counter and the fact that this is a stock, which is bound to participate in the run-up to 12,500 or even higher. I think that is what is driving this counter up.
How do you map domestic liquidity at this point? You had a look at the figures in terms of the mutual funds selling on Wednesday?
We have always seen the domestic mutual fund segment going for brief bouts of profit taking every time the market keeps up its surge and this we have seen all the way from lets say 5,500 to the current level.
We have always seen Indian mutual funds take calculative calls and most of them have gone right, even if one studies the patterns between markets moving because of heavyweights or the activity shifting to side counters. There have always been mutual funds in the forefront in terms of churn and we are seeing positive movement out there aside of the domestic mutual fund liquidity.
Like I said it is the retail sector, the HNI sector, which got bruised in May and June and which is once again waking up and taking a look at the market and there is a fresh spirit, which is coming in.
People are looking to participate in the market with a vengeance yet again, perhaps with a view to recover some of the May-June losses. I think that is creating a fresh way of activity in heavyweights and we have seen renewed interest in quality midcaps and smallcaps as well.
Banking is the other space, especially PSU banks that began to move yesterday, what do you like from there?
The quality is clearly with PNB and State Bank of India. We have seen selective activity in other counters as well but I think at a time when the interest rates scenario gives you a feeling of hardening as well as being administered a management managed by Central government, I would hesitate in trying to take punts on side counters in the banking sector, particularly PSU banks and I would stick with the larger two.
The reason is also that we are continuing to see excellent moves from there, good moves on PLR and interest rate hikes, both on the domestic deposit side, they are predicting fairly robust credit offtake rates and I think that both of them have sufficient headroom in terms of current levels vis-à-vis all time highs in terms of moving up and can really be the big beneficiaries. I would stay with State Bank and PNB.
What would you do with real estate pack because we have seen a considerable softening up in stocks like Mahindra Gesco, Bombay Dyeing from the recent highs and of course in Ansal and Unitech? How do you play that whole pack now?
You stick with the developer pack, the construction pack and essentially do not just play on inventory. There is a tendency to play the entire real estate space based on the basis of acreage that certain stocks hold or the kind of real estate inventory they have for selling.
I think the stock profit there is fully reflected in the valuations, but it is players like Mahindra Gesco and some others who are taking a combination of industrial and commercial development along with SEZs, as well as the real estate space for household purposes, who will really deliver a lot of value to investors and all declines must be used to invest in stocks like that.
At the same time, I am a fan of construction space because I see a tremendous capacity shortage there. We have a host of infrastructure, industrial and real estate projects all over the country and I do not think there are too many very good project implementers.
So a stock, which has that key success factor to offer is the one to be accumulated and therefore, if you allow me to club the construction space along with the real estate space, the best players for you would be developers who have a combination of both. I think Gammon or Gesco or HCC probably fall in that space.
What's been moving in spurt is the pharmaceutical space, sometimes frontliners or the MNC pack. Do you like anything from that entire universe?
I would stick with my quality logic there and would stay with the big three Indian pharmas and probably a Sun Pharma. The big three Indian pharmas tend to always give good opportunity to buy them when they fall; keep playing the simple 'buy on lows' and 'sell on highs' strategy there.
All three are pursuing a consistent strategy, which we have always discussed and Sun Pharma is also into good things. So I would stick with these four.
In the MNC space there are many question marks on the drug price related issues; few things needs to be sorted out but an Aventis Pharma is always a good buy. So one has to just do a fundamental base investing there, one cannot do momentum plays there. One can always do good trading in the big three in India, if one is a pursuer of 'play the cycle' theory.
Any disclosures to make on stocks you spoke about this morning?
The usual ones, as an individual investor and as a broking house there would be a direct interest in everything that I have said.
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