Mkts likely to recover faster: PN Vijay

Portfolio Manager PN Vijay said that India has managed domestic inflation and the interest rate scenario fairly well. He believes that markets may bleed for some more time due to high inflation but should be out of the woods a lot faster.

Sudarshan Sukhani of Technical Trends said 3,850 is the next support level for the markets. "If 3,850 and 3,600 breaks, then the market has no support for the next 1,000 points."

Excerpts from CNBC-TV18’s exclusive interview with PN Vijay and Sudarshan Sukhani:


Q: Is there any end to this agony?

Vijay: We thought there was some buying yesterday but it got totally wiped out in today’s trade. There would be an end when a couple of these issues get resolved decisively.



The first issue is that of the nuclear deal and the stability of the government. The second is high oil prices and the third is domestic inflation. Unless either of these has been put to rest, one does not see any fresh buying in a large scale.



The nuclear deal should go off the front in about a week or so. The government seems to have got their act together and will slip through this whole thing without any major damage. One needs to wait a bit more in case of inflation. One doesn’t know how much the base effect really is and how much this has impacted inflation. So, we would see inflation for some more time.



Q: Having seen bear markets in the past, do you think that we may be made to wait longer than what seemed the case in January and March? We were all talking about the recovery by the end of the year.





Vijay: I lived through the 2000 bear market, which was the most recent one. There is a lot of similarity; the valuations got very high and the fall was very swift. But there were a couple of major differentials. The broad economy was at that time already starting to go down and we came to a growth rate of 4.5% or so in 2002-03. Agriculture was down as that year had one of the worst droughts. So, things were getting worse from the start of the top in February of 2000. So, the signs were clear.

There was a case of high interest rates as well. The IDBI’s of the world were borrowing at 18% at that time. The real estate interest rates were really high and corporate India was finding it very difficult to borrow. From these parameters, if you look at the last 6 months of downtrend that we had, we have managed the domestic inflation and the interest rate scenario fairly well.



I don’t see any large corporates really feeling the pinch for money. The macroeconomics is definitely not that bad as it was when the last bear market started. So, we will have to bleed some more time for inflation but we should be out of the woods a lot faster.



Q: What is your take on real estate Yesterday, DLF announced a buyback. All stocks were up 10-12% and today they have almost gone back to where they came from. Do you think there is more pain left in that sector?




Vijay: There could be more pain in this particular sector as compared to the other rate sensitive sectors like banking and auto. There is a genuine oversupply in the market. It is not driven by interest rates or even a lack of demand.



Even if one assumes that inflation was at 6% and there was no bad news last year, I still think that the sector was looking for a severe correction because of the sheer oversupply across the country. Punters who had borrowed money to get into allotments were really dropping off.



So, companies like DLF and Unitech that have funded themselves very well, will pull through. But midcap ones like Sobha, Parsvnath or Omaxe and many of them who are cash strapped would take a lot longer to pull through.



Q: Are you buying any of the metal stocks at this point? The good qualities like TISCO and Sterlite of the world were falling at the rate of 10%. Would you buy anything there at all?



Vijay: We did buy Tisco today. At around Rs 650, Tisco is an excellent buy. It is making a lot of money on steel prices. Even with the high cost of production, Tisco is my top pick in the metal sector at these beaten down levels.




Q: Are you buying any banks right now? Do you think you will get better prices over the next few weeks and months?



Vijay: We have been pecking at Axis Bank at around Rs 600 levels because a majority of brokerages, even the foreign ones who are rather negative right now on the markets, have been giving buy signals. This is a superb bank that has capitalised itself very well and has not rushed into home and auto loans. They have got a very well heeled balance sheet. It is a very modern, technology driven bank. So, we have been pecking at Axis Bank at Rs 600 levels.



Q: Is there any hope that we may form some kind of a base around these levels?



Sukhani: There is always hope. We can always wait and expect something better. The chances are very dim. Yesterday, we saw lows of 3,850. If these lows hold on, which means the Nifty doesn't go down again and breaks them, then we rally and reach 4,350 which was the last recorded high. That will show us some strength in the market. There are so many ifs, but this is a possible scenario. The question is about hope. I don't hold much hope because yesterday rally was a classic bear market run up. The bear market is alive and kicking, and today's market action has confirmed that. So, there is a theoretical possibility that 3,850 will hold on. We will start a bull run and reach 4,350. But the chances as of today are pretty low.



Q: What's the next level of support you would watch, because 3,850 is just about 50-70 points away, and that is an hours work nowadays?



Sukhani: Yes, it is and that is the worry. Earlier, I spoke about 3,600, but now with a pivot low being made yesterday, that level shifts to 3,850. If 3,850 is broken, it is equivalent to saying that 3,600 would have been broken, then the Nifty is heading for a freefall because there is nothing to support it for the next 1,000 points down.



Just four months ago when 5,500 was being broken, I had suggested there is a 1,000 points vacuum. That did workout. When 4,400 was broken, some said there is no support. We have seen a 600-point decline. Now at 3,600-3,700-3,800, whatever is one's pick, there is nothing for the next 1,000 points. The Nifty can stop wherever it wants.



Q How do you trade now then, do you just remain neutral and watch till that 3850 and then take a decided technical call?



Sukhani: Yes, because what has happened in two days is that volatility is increased. Traders get killed by volatility, even if they make the right call in terms of direction these intra-day up and down moves can actually stop them out many times. So at this point it's wiser to stay away. Let's wait for the re-conformation that the bear market is intact when 3,850 breaks. If the market moves up, I am not taking long positions. There will be no short positions but the market will convincingly go up to 4,350 for traders to go long now.



Q: Two charts which were particularly weak today are Tata Steel after that big 10% fall, and ICICI Bank which couldn't quite follow SBI in its rally?



Sukhani: ICICI Bank has broken down all support levels much earlier. A target of Rs 500 is within striking distance. It doesn't have a good chart at all.



Tata Steel has been a big disappointment because the chart suggested initially that in its bull run, it would ignore whatever happens to the Indian market. But that hasn't happened. It has broken down significant support levels. While it is difficult to say where it will end up, its no longer a buying opportunity. So, one has to get out of the stock when one can.

Thanks to http://www.moneycontrol.com

India's key stock index soars more than 5 percent in bargain hunting

MUMBAI, India: India's key stock index jumped 5.4 percent Wednesday, breaking a prolonged spell of deep cuts as investors snapped up bargain buys.
The Bombay Stock Exchange's benchmark index, the 30-stock Sensex, soared 703 points to 13,665 points.
On the broader National Stock Exchange, the 50-company S&P Nifty index rose 197 points, or 5 percent, to 4,093 points.

The rebound in the Indian markets came a day after the Sensex slumped 500 points to 12,962 points, the first time the index had dropped below 13,000 points since April 2007.
Analysts were encouraged by Wednesday's rebound, but they warned that global issues like rising oil prices and inflation still remained a concern.
Oil rose past US$141 a barrel on Wednesday on the New York Mercantile Exchange, and India's inflation for the second week of June rose to a 13-year high of 11.42 percent.

"Macroeconomic factors at the global and domestic level are still a gray zone. Oil prices are still a worry and inflation is not coming down in a hurry," said Rajeev Sampat, director of Parag Parikh Financial Services. "This is a pullback after drifting downward for so long."

But he said there would be another bout of selling if oil prices shot up.

"It's a relief rally, it's too early to say whether we have tested the bottom and are on the way up," said Sampat. "It's too early to term it an end of the bear market."

Investors picked up blue-chip real estate and power shares that have been beaten down sharply on concerns over surging oil prices and rising inflation.

The gains were led by real estate company DLF Ltd., which climbed 15 percent to 424 rupees.

Power utility Reliance Infrastructure Ltd. jumped 12.6 percent to 791 rupees, recouping some of the previous day's losses when the stock fell 10.5 percent.

Oil company Oil & Natural Gas Corporation, or ONGC, rose 8 percent to 855 rupees, engineering firm Larsen & Toubro Ltd. gained 7.3 percent to 2,297 rupees and automaker Mahindra & Mahindra Ltd. advanced 6.6 percent to 469 rupees.

Market closes more than 700 points up

Mumbai, July 2 (IANS) The Indian equities market closed in green Wednesday. The 30-share benchmark of the Bombay Stock Exchange (BSE) sensitive index (Sensex) opened at 12,948.05 points, touched a high of 13,712.31 before closing at 13,664.62 points. It went down by 702.94 points or 5.42 percent at the days close.
The National Stock Exchange (NSE) S & P Nifty, which opened at 3,895.30 points, closed at 4,093.35 points. It went up by 196.60 points or 5.05 percent.

Indian Stocks Gain Most in 3 Months, Led by Infosys, Reliance

By M.C. Govardhana Rangan

July 2 (Bloomberg) -- Indian stocks rose for the first day in four, led by software exporters including Infosys Technologies Ltd. on the expectation a weakening rupee will boost overseas earnings.

The Bombay Stock Exchange's Sensitive Index, or Sensex, rose 702.94, or 5.4 percent, to 13,664.62, the biggest jump since March 25. India's key benchmark has plunged more than 35 percent from its record in January and India's overall market value yesterday slipped below $1 trillion for the first time in a year.

``From a three-year perspective, these levels could give a decent return even if the economy grows at around 6 percent'' a year, said Tridib Pathak, chief investment officer at Lotus India Asset Management Co., which manages assets equivalent to about $1.8 billion.

Infosys Technologies, India's second-largest software exporter, rose 6 percent, the most in more than two months, to 1,820.6. Reliance Industries Ltd., which gets more than half its revenue from overseas markets according to data compiled by Bloomberg, gained 4.9 percent, the most in more than three months, to 2,143.1.

Satyam Computer Services Ltd., the nation's fourth-largest software exporter, rose 7.2 percent to 463.3, the highest since April. 29, after the company said it aims to have $1 billion of sales from Europe.

U.S. Revenue

Indian technology firms such as Infosys get more than 50 percent of their revenue in U.S. dollars. A stronger dollar increases the amount of Indian currency they receive. India's rupee fell 7.3 percent last quarter, the biggest decline in a decade. The currency yesterday fell to the lowest in 15 months as crude imports widened the trade deficit to a record.

India's market value has lost $919 billion from its record on Jan. 7 as overseas equity investors pulled $6.37 billion of funds out of the country so far this year. Net sales accelerated after the central bank raised interest rates twice last month because oil prices pushed inflation to a 13-year high.

The S&P CNX Nifty Index on the National Stock Exchange today gained 196.60, or 5.1 percent, to 4,093.35.

DLF Ltd., the nation's biggest real estate developer, jumped 15 percent, the most in nine months, to 423.95 after the company said it planned to consider a share buyback on July 10.

Banks Rebound

Bank shares led by ICICI Bank Ltd. and State Bank of India, which have lost more than half their value since peaking in January, gained after early losses on speculation the fall was overdone. ICICI Bank, the second largest, advanced 5.4 percent at 621.05 rupees, and State Bank, the largest, rose 5.2 percent to 1,078.35 rupees.

The following were among India's most active stocks. Tickers are in brackets behind company names.

Mundra Port & Special Economic Zone Ltd. (MSEZ IN): The operator of the largest cargo terminal outside state control, rose 3.15 rupees, or 0.7 percent to 481.3, after falling 19 percent following a Press Trust of India report that the Supreme Court had barred development of its land.

Ashapura Minechem Ltd. (ASMN): The miner fell 10.4 rupees, or 7.6 percent, to 126.75, sliding for the fifth straight day, after it said there were administrative delays in getting permission to export and that bauxite volumes may decline.

To contact the reporters on this story: M.C. Govardhana Rangan in Mumbai at grangan@bloomberg.net

Sensex to bottom at 12000 levels: Religare Secs

Amitabh Chakraborty of Religare Securities feels that the Sensex may bottom at around 12000 levels, while the Nifty may bottom at 3800 levels. The swing could be around 400-500 on either side, he added. His estimates are based on the analysis of the last bear market analysis. Chakraborty suggests that the Q1 results need to be watched closely now.

Excerpts from CNBC-TV18's exclusive interview with Amitabh Chakraborty:

Q: Do you think that the market is anywhere near finding support and are you sensing panic amongst your retail and HNI crowd?

A: At Religare, we are of the opinion that probably we are coming to the end of the whole fall. Basically our view is that around 12,000 Sensex levels or 3,800 Nifty levels, market will find a bottom probably. This is based on last bear market analysis, which actually happened in February 2000. Market fell from trailing PE of 20.6 to a trailing PE of about 12.8 in September 2001. Then market remained at that level upto about June 2003 and from there a four years bull market happened.

January 10, when the peak happened this year, we were around 28.6 trailing PE and currently assuming 10% growth in Sensex earnings then we get around 12,000 level. So we believe that 12,000 or 3,800 is the level at which the market will bottom out. Should that be the case of course the swing can be 500-600 points on this side, so it can be 11,500 nobody can catch the exact point. But the point that we want to make is that probably we are coming very near to the bottom where the long-term funds should get into all those A group stocks. When we say long-term, we are saying more than one-year horizon. But on a shorter-term, if we see probably there would be a bounce back from these levels and as they begin the market will come down.

We will be watching very closely Q1 results, our analysis shows and our report will be coming out tomorrow, that already we are seeing a slowdown for the last three quarters. So this will be a continuation of the same trend, but we will not be degrowing. So once that result comes out in Q1, there is no degrowth, but it is a slowdown from a high double digit. Probably it would be a single digit growth, but growth is still there and Q2 also we are expecting a same kind of trend, no degrowth but slowdown of the growth. If that is the case then I think market will trade positively.

Q: If you have to make up your mind and buy now, can you give us two to three clusters, which you would like to buy into if given your call that the markets are nearing in on a bottom?

A: Public sector banks, which are less than the adjusted book value that is a sector that we will be looking at. Also some of those capital goods sectors where a lot of selling has happened, I think we will be looking at that sector.

The sector that we will not be looking immediately though it has come down significantly is the real estate sector. We believe that real estate sector will be under pressure for some more time.

Source: moneycontrol.com