Ambareesh Baliga, vice-president at Karvy Stock Broking believes the markets won't see a new high before October-November, as the next big trigger for this market would only be the September quarter results.
He agrees that he would hold on to a couple of stocks with a long-term perspective, but adds that at these levels, he would not make fresh investments for long-term.
Giving his suggestions on midcap holdings at this point in time, he says, "I think it's better to exit those stocks, book a loss and enter into stocks, where you have an understanding or at least consolidate on some other holdings, at least average out the holdings which you have, so that at least you can exit those stocks at a higher level, at a later date."
Excerpts from CNBC-TV18's interview with Ambareesh Baliga:
The Sensex almost reached 11,500 today. Not bad, isn't it?
Not bad at all. In fact, we expected this sort of a situation possibly sometime around October. So it has actually happened two months too early.
Do you think there will be more upside from here in the near-term?
For the midcaps, surely there would be an upside because the midcap rally has just begun. We have just seen just about five-eight sessions of this sort of a midcap rally. So I think it will continue for a while more.
Looking at the sort of volumes that are happening today, it seems that the retail investors and the HNIs are again back in the fray. They have just come back now, so possibly we could see this rally continuing at least for the next week to ten days.
What has brought them back?
I think the rally that we saw in the last couple of days has brought these people back as otherwise that feeling of being left out would be there. Like they have seen, a couple of these stocks actually go up 10-15 per cent in some cases, even 20-25 per cent.
So that feeling is there that if we don't get in now, we may in fact lose out on this rally, so they are entering now. Surely they may make money for some more time, but I just hope this time again they don't get stuck at higher levels.
What have you been doing these past few days, booking profits or are you largely invested?
Whatever we had invested earlier, like in the midcaps, quite a few of them have actually given us around 20-25 per cent returns. So we are exiting slowly at these levels and at the same time, we are also going long on a couple of stocks, where we have a technical buy call on.
But surely at these levels, I will not buy for long-term because we still hold the feeling that the market would react from whichever levels. In fact, we don't see a level beyond 12,000-12,500 levels now. So it doesn't really make sense for us to invest fresh from a long-term perspective.
Although we were nearly 30-35 per cent in cash earlier waiting for lower levels, which didn't come, but whatever stocks we had, they have given us a decent return. So we are using this opportunity to keep booking profits if it rises.
Any thoughts on the sugar space and the news flow that is doing the rounds now?
Most of these prices are down basically because of the expectation that the sugar prices will come down. But people should actually look at post October-November, especially when again exports are allowed across, along with the ethanol story, which should pan out in the near future.
This is possibly a decent opportunity to buy back sugar stocks, if they again fall another 5-8 per cent from here. Surely a stock like Balrampur Chini is a decent buy closer to around Rs 94-95 levels.
What have you been telling your clients about oil? There have been very good rallies over the last few days in HPCL and BPCL.
I think it's a great opportunity for people to at least exit these stocks, if they are stuck in these stocks because making a statement I think is much easier than actually implementing the whole thing.
Would you say the same for midcaps like LML and IFCI?
Yes, surely. Again if you are talking of IFCI, I think most people are stuck either between Rs 11.50-12 to possibly Rs 16-17. So for them, basically this price movement from Rs 8 to Rs 9.50 is not really going to make much of a difference, unless this price comes to Rs 13-14.
This is the same story across various midcaps; people are stuck at much higher levels. Even a movement of anywhere between 10 per cent and 30-35 per cent will actually not make much of a difference to most of these people. In the past couple of weeks, we have seen that the volumes were quite low in midcaps. So people across the market have not actually participated in this rally.
Unless they really make money over the next couple of days or weeks, I really don't see most of them coming back into the market. So, this puts a question mark whether this market is sustainable at these levels or not, which again, I doubt.
What is it then that you expect to see for the rest of this month? Do you think it will be a gradual move either ways?
I think over the next week - ten days, there is surely going to be momentum in the market. People are just about coming back and are at least putting in some fresh money. So there will be some rally for the next seven - ten days.
You could again see the midcaps like scrip specific moving possibly another 15-20% from here. Again, I am not saying across all the midcaps, instead there could be specific movements of around 15-20%.
Possibly over the next two-three days, you could see this happening across the largecaps. Although the index is moving up, you don't have lot of largecaps actually moving along with the index. This again will happen in the midcaps over the next seven-ten days, I think there will be a sell-off post that.
What's the right way to approach, some of your midcap holdings now? Should one wait for their purchase prices or should one liquidate it at rallies and try and look at some other stocks?
I think the best thing to do is at least exit the stock, where you don't have an understanding. It depends on person to person, if a person doesn't understand a particular stock, but he had bought it at a much higher level, because of the tip he had received at that point of time, I think it's better to exit those stocks, book a loss and enter into stocks, where you have an understanding or at least consolidate on some other holdings, at least average out the holdings which you have, so that at least you can exit those stocks at a higher level, at a later date.
Just to give you two examples, if you have bought two stocks at Rs 100, both are at Rs 40 today and possibly you may have seen Rs 25-30 earlier, it is better to sell off one stock out of that, which you don't understand and buy the other stock assuming that you understand the other stock and average it out. By doing this, your cost comes somewhere close to Rs 55-60 levels.
If you have to choose between Bata and maybe an Andhra Bank, what would it be?
I would possibly choose a Bata because again that's the flavour of the season. So I would choose a Bata over Andhra Bank.
What are you telling people about those real estate player stocks like Mahindra Gesco, which have started bouncing back now?
The pure real estate players like Mahindra Gesco, has got a very decent bounce back from lower levels. I really don't see it crossing the earlier highs. And I think this is possibly a decent time to exit. Incidentally, we had a 'buy' on Mahindra Gesco a couple of days back and we have asked people to exit today.
Any thoughts on the shipping space, particularly the two liquid ones, GE Shipping and Varun Shipping?
We had a 'buy' call on Mercator just last week at around Rs 30 because we saw the freight rates hardening. Varun, I think has gone up due to two reasons, one, because of the freight rates and the second reason of placement. In fact, we see Varun going up another Rs 10-12 from here before the placement happens.
What are you doing with all your holdings in the banking space now, frontline or midcap?
We are just holding on for the time being, we are not selling or buying. Whereas in case of other midcaps, as we were talking earlier, we have been booking profits. But as far as banking is concerned, the frontline ones as well as the smaller ones like Dena Bank, Karnataka Bank, are being held on to.
What about i-flex, that's a bigger one?
We are still positive on that stock, because they have revised their price. I think one can just hold on to this stock for a while longer.
What do you see as the next big trigger for the market?
The next big trigger for this market should be the September quarter results, which we hope will again reassure the foreign investors that India is still on the growth path, the growth story is still not over. I think that is what should bring them back. That was one of the reasons why we were saying that possibly October-November onwards you should see a decent rally starting again.
But then, that has somewhat started much earlier, but we need to just wait and watch whether this will last or not. Our feeling is that this rally may not last too long, the actual rally will possibly start somewhere around October -November.
So you don't think that before the October numbers come in, we could be headed towards close to a new high again?
I don't think so. I don't think we will see a new high before October-November. In fact, earlier we were talking of those 9,400-9,500 levels, which I don't think will happen. It doesn't make sense talking about those levels, but then surely, you will see a decent reaction from here because till then, there is no major trigger as such. And with this sort of a rally, that you have seen now, I think the market is getting more or less fully priced for the time being.
Any disclosures?
You can assume that my clients and myself are holding the midcaps we talked about.
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