According to Deven Choksey of KR Choksey Securities, 11,900 is a crucial level for market. As at this level, he thinks that the market could see some resistance as well as some profit booking.
But he is confident that the markets will see further upside, as the news flow coming in, particularly from the global front is positive.
Excerpts from CNBC-TV18's exclusive interview with Deven Choksey:
This market continues to move up, where are we heading do you think?
Clearly, at this point of time, 11,900 levels is bit crucial because at this level, market meets some amount of resistance and also there is a possibility for profit booking. So to that extent market is moving little cautiously.
Unless there is some very important triggers or the news, which takes it, pass 11,900, it may wait here for sometime. Do some amount of profit booking and then possibly take a next step forward.
There is no doubt that the upside in the market is possible given the fact that most of the news which are coming in are positive, particularly from the global side. Oil prices are easy; inflation rate hike issues are now settled to a great extent.
What we believe is that the money, taken out by the hedge funds from the oil and oil futures, flow into the equity market then possibility of liquidity driven rally can also take place.
So all in all, it is positive as far as the upside movements are concerned. There are negatives as far as the Q2 working expectations are concerned in some of the companies and pockets.
There maybe some impact but that would be taken up maybe another two weeks from now when we will all come out with some amount of estimates on earnings. But as of now the mood is quite positive. It's consolidating and maybe we will see an upside once it crosses above 11,900.
How has rollover been, any cause for concern or hick ups in tomorrow's trade?
Not really. It is quite smooth as of now. I see that most of the rollover is getting through. Maybe by tomorrow, we will have a better picture. By the end of the day, we will know exactly how much is going to be left out..
But more or less it is in line with the expectation. As such the majority of the position didn't get built up in earlier month. So to that extent the concern is less. Maybe we are going to see smooth track hereafter.
Do you think this time HPCL and BPCL will be lucky in breaking through because the last time they went up but also came off after initial rally, do you think the second attempt will be more successful?
The triggers would be one or two. One, of course, of the softening of the oil prices, which we believe is likely to happen. If the oil prices settles somewhere between $60 and $65 per barrel as expected by most of the oil analysts across the globe then possibility of these two stocks continuing with the rally would be high.
At the same time if the government does get into the action as far as kerosene and LPG price hike is concerned, if not fully maybe partly, to a great extent it would be a breather for both these companies.
We will see a continued rally in both these stocks. As of now nothing is negative especially for both these companies, maybe one will have to see as we progress further.
How are you approaching that entire space and do you like anything at all, ferrous or non-ferrous at this point?
As we have been maintaining that we don't necessarily attach ourselves with the daily price movement of the commodity in the metal space. It is bound to happen that on the daily basis these commodities would fluctuate in the commodity markets.
If we keep on taking the view on these stocks based on those fluctuations on a daily basis, which may not give us a right indication as far as further investments are concerned.
But so far as the investment portfolios are concerned, companies like Tata Steel, Hindustan Zinc and Hindalco are long-term value picks for us in the portfolio. We believe that these are the valuations at which the stocks are available. Maybe going forward, we may have to wait for some more time because they are on the expansion spree at this point of time.
We may have some quarterly impact on the result as well but the values are going to get built up in these companies over a period of time and one will find huge benefit from these companies over a period of time. So the approach clearly is to stay invested without looking at the commodity price movements.
You have got the call out from Gitanjali Gems from your brokerage?
Not really, we don't track this company.
What about Centurion Bank?
I am not tracking Centurion Bank closely. But we have seen that there are two or three main issues. High yielding credit growth is taking place for most of the banks. One is also seeing the PLR hike. Further, a good amount of pressure has eased on the NPA side.
All put together would add to the bottomline in the banking category, for which we have seen some of these banking stocks have moved up.
We believe that going forward given the strong economy and the growth happening into the industrial sector, this is the sector, which would probably see good amount of steady upside.
Would you buy Tech Mahindra at Rs 530 levels?
We don't track it.
Anything that you like in the midcap technology space at this point?
We definitely like some of the stocks in the midcap space, particularly the companies that are related to infrastructure and the activities related to power.
So we find the companies like Emco Transformer quite interesting from the investment point of view, as they are into power engineering space, manufacturing of transformer.
They were in news this morning, but most importantly, given the kind of order book that this company has, it is expected that there would be a jump in the earnings in the current year by at least more than 70-80 per cent from the last year base. It is likely to continue for the next another year or two as far as the order book is concerned.
So we believe that such kind of stories, where huge amount of values are built in, probably would yield fair amount of returns, if one stays invested.
What about a commodity like sugar, because those stocks are clearly struggling? Balrampur is down to Rs 93; Triveni is down quite a bit today. Do you see these stocks grinding down to even lower levels?
I am not sure of further lows as far as these stocks are concerned, but if I have to put things in perspective, then most of the sugar companies have had a decent run up in the last one year, for which technically, they are expected to cool down for a while. This is but natural.
Most importantly, on the fundamental side, particularly Balrampur Chini had got the substantial amount of inventory at the end of Q1, which is going to find valuation at the end of Q2 in terms of sales and profits. It is going to result into some amount of better numbers for them.
At the same time, given good rains across the country, it is expected that the sugar crop will probably be good and in the next sugar-crushing season, we will find these companies getting a good crop in hand to crush. These companies are building huge capacities.
For example, Bajaj Hindustan is putting across new capacities, which will come up in the new sugar-crushing season. To that extent, volume led growth will definitely come.
The current subdued price movement in the sugar stock is also due to some amount of softening of the sugar commodity prices. If one is taking a view on the volumes given the capacity that they are building up, clearly sugar stocks should bounce back in subsequent quarters.
Do you track any of these companies SRF, Gujarat Flourochemicals and the whole news surrounding carbon credit?
We do look at the industry in general and definitely Gujarat Flourochemicals has been looked at earlier also. It makes lots of sense to look at the company on individual merits.
If ACC is dealing with credits, then at this point of time, they will probably ensure that there is a good pipeline of supply built in before they start negotiating heavily on the prices front. To that extent, one will have to look at these aspects a little more carefully as far as the balance sheet valuations are concerned.
As far as Gujarat Flouro is concerned, definitely a lot of hype has taken place and maybe the valuations are also, to an extent, justifying that aspect. But what we see is that this market gives a lot of opportunity. This kind of business could offer a price opportunity at some point of time to get into or pick up these particular stocks for investment.
What about the fundamentals themselves? For companies like SRF and Titan, which were the big flag bearers of the midcap space, do you expect them to reclaim their old highs?
There is no doubt about that at this point of time. As long as they keep on maintaining their growth, this is justified.
Any disclosures?
My clients would have positions in some of the stocks, which we have talked about.
For more, log on to www.moneycontrol.com
