Sensex to touch 24000 sometime during the year: Raamdeo Agrawal

In an interview with ET Now, Raamdeo Agrawal , Jt. MD, Motilal Oswal Financial Services , talks about contra investing and his contra calls.

Define contra investing for us.

The stock which does not deserve popular opinion is what is called contrarian kind of view. You make money when you buy a stock which is absolutely unpopular, because most of the money is made in this kind of stock when the perception changes. Perception is the driver of PE. If the perception of the stock is negative and from there it changes to positive to a PE multiple of 10 to 100, it makes you a lot of money.

Has contra investing worked for you?

I am not a contra investing type. However, in one or two situations, I bought in the past and was very successful in those ideas. I had bought Calcutta Electric 5-6 years back at about Rs 13. The whole company was available at about Rs 90 crores. There were factors like monopoly into Calcutta, employing transmission and profitability and they were highly leveraged and the interest rates fell from 13-14% to around 6-7%. We did a ratio called interest cost to the market cap and it turned out that interest was 3 times or 4 times more than the total market cap and hence the impact of the interest rate decline would have been most on Calcutta Electric. People around me from Calcutta told me that it looked worse than BMC office and I couldn't even stand there. They told me not to look at it and that was the reason it was at Rs 13.

What prompted you to buy that stock?

I had a very bullish view on change in the value of a stock once the interest rates declined and we saw major decline in the interest rates. I wanted to buy something which was getting hurt due to the high interest rate scenario at that point of time and would be significant beneficiary. Calculated business was very stable and it had a good reputation in Calcutta under RPG management but yet the net profit after tax was low because it was heavily leveraged and West Bengal Government was disputing about what costs were allowed to be passed on. As the interest rate came down, the profits that were marginal or negative shot up by 4-5-6 times because all the interest became benefits to the company. The stock flew from Rs 13-14 to around Rs 150 in 2 years time and then I sold it at about Rs 120. The stock further went up to Rs 400-500.

Sensex steady at open...SBI extends losses

At 09:25 am (IST), theBSE Sensex was trading at 18,180, up 39 points over the previous close. It had earlier touched a day's high of 18,218 and a day's low of 18,114. It opened at18,177.

The Indian market has opened with a positive bias, with the BSE Sensex and the NSE Nifty posting modest gains in early morning trade. However, the two main indices are struggling to hold on to the gains as weakness in banking major SBI continues to weigh on the sentiment. The market breadth is not great with the non-index counters too not going anywhere in a hurry.

At 09:25 am (IST), theBSE Sensex was trading at 18,180, up 39 points over the previous close. It had earlier touched a day's high of 18,218 and a day's low of 18,114. It opened at18,177.

NSE Nifty was trading at 5,444, up 5 points over the previous close. It had earlier touched a day's high of 5,460 and a day's low of 5,429.It opened at 5,448.

The BSE Small Cap index and the BSE Mid Cap index were trading flat.

In terms of sectors, FMCG and Capital Goods were leading the rise withthe indices up ~1%. Select, IT, Power and Metal were up marginally. PSU, Auto,Oil & Gas and Banking indices were down 0.5-0.2%.

Wipro, HDFC,ITC, L&T, BHEL, Hindalco, TCS, Bharti Airtel, Power Grid, Hero Honda, RCOMand HUL were among the clear winners on the Sensex and the Nifty.

SAIL, TataMotors, BPCL, Maruti Suzuki, ACC, NTPC, Cairn India and GAIL were among the major laggards in the Sensex and the Nifty.

Shares of mid-cap IT firm Mphasis are down sharply after its US parent Hewlett-Packard announced disappointing outlook overnight. HP shares fell 8% in the US trading.

Among the index heavyweights, Tata Motors and Reliance Industries are in thered while ONGC has recovered. ITC and L&T are up ahead of their results over the next couple of days.

In global action, most Asian markets are trading on a firm footing. European markets closed sharply lower amid sovereign debt worries. US stocks recovered to end off intraday lows. Crude oil in New York is up from a three-month low. In currencies, the yen is at a one-week low versus the euro while the British pound has gained against the dollar.

Market expert: SBI, RIL, Tata Steel may lead Nifty to 5330

In an interview with CNBC-TV18, Jatinder Sharma, Partner, Equity Strategists says, after trading between 5,450-5,460 and 5,600 for past nine sessions, the market has given very valid technical breakdown. “SBI results may have tilted balance firmly in favour of the bearish outcome,” he adds.

He believes that now the levels to look forward would be around 5,330-5,335. “SBI, Reliance and Tata Steel could be the leaders in this particular fall and they might lead it towards 5,330-5,335 kind of levels,” he adds.

Also read: See Nifty in range of 5450-5600 for few days, says Deven Choksey

Below is verbatim transcript of his interview with Reema Tendulkar and Gautam Broker Also watch the accompanying video.

Q: The Nifty has broken that 5,450 mark? Now, what is the kind of downside which is opened up on any kind of trade?

A: I think after trading between 5,450-5,460 and 5,600 on the upside for past nine sessions, the market has given very valid technical breakdown. SBI results may have tilted balance firmly in favour of the bearish outcome. So, I believe that now the levels to look forward would be around 5,330-5,335 levels with some support coming in between around 5,375-5,380 levels.

Q: If we go all the way down to the 5,350 mark, what is primarily going to be leading us downside over there? Any kind of strategy that you have on key banking names or even the banking index now?

A: Along with SBI today, two more heavyweights have seen technical breakdown, Tata Steel as well as Reliance Industries. Reliance Industries was finding support around Rs 935-940 levels. It was expected that it will bounce back again to about Rs 979-980 kind of levels, but it has broken support. Now, it could be headed towards Rs 880-885 levels.

Similarly Tata Steel, it has given a valid breakdown again on daily charts as well as weekly charts. It could shed some more weight in the coming days. So, SBI, Reliance and Tata Steel could be the leaders in this particular fall and they might lead it towards 5,330-5,335 kind of levels.

Q: Technically, what about State Bank of India? What are the charts telling you as key support levels for State Bank of India?

A: State Bank of India was precariously placed around Rs 2,600 levels before the results. It has given a breakdown now. The levels to look forward to in the short run would be around Rs 2,375-2,380 where strong weekly support is seen. So, there could be technical rebound from around those levels.

Q: Do you think there could be any kind of an opportunity in the financial space, any other smaller banks that you like?

A: In the morning, Bank of India was looking good because it was finding support around Rs 390-385 levels. It has found support around these levels for past so many months now. So, a technical rebound could have been expected. Even now, I believe that that stock could be bought at current levels with small risk trade because Rs 385 is the stop loss level for Bank of India and it could go to all the way up to around Rs 435-440 or maybe if the market support, it could even head higher.

Among the largecaps, I believe HDFC Bank is still showing some resilience around Rs 2,240-2,245 levels. So, maybe on semblance of some support around these levels, one could go long in HDFC Bank.

Q: What would you recommend buying in terms of the sectors in the defensive side, pharma, FMCG and maybe IT?

A: FMCG and pharma are looking much better than even IT. In IT, the whole chart pattern is not looking good because of Infosys. Infosys is trading just around its strong support levels, weekly support levels about Rs 2,835-2,850 levels. But it is not showing any inclination to move higher.

TCS might trade in a range. But it is not looking good to give you some decent returns even in the short run. So, we are left only with the FMCG as well as pharma.

In FMCG, Hindustan Unilever looks to be a better chart right now, in fact better than ITC because it has held on to most of its gain for past three-four sessions and absorbed all the profit taking above Rs 305-306 levels. So, it could head towards Rs 320-325 levels over next five-seven trading sessions.

Nifty hovers around 5500; market awaits SBI results for cue

The Indian markets opened on a subdued note awaiting results of India's largest public sector bank SBI. The limelight was hogged by MSCI India addition stocks in early trade.

At 09.20 hrs IST, the Sensex was up 39.15 points or 0.21% at 18384.18, and the Nifty was up 5.80 points or 0.11% at 5504.80. About 530 shares advanced, 191 shares declined, and 2920 shares remain unchanged.

Buying was seen in capital goods, FMCG, IT and consumer durables stocks. The broader markets too were trading with nominal gains.

Titan Ind, Shriram Transport, Mundra Port, Dabur, Bank of India and Asian paints have been included in MSCI India Index. The stocks have rallied in the range of 2-11%.

Top gainers on the Sensex: TCS, Sterlite Industries, Larsen, Bajaj Auto and Cipla were up 0.-1.1%.

Top losers on the Sensex: ONGC, Hero Honda, NTPC, Wipro and Maruti Suzuki were down 0.5-3.5%.

Government increased upstream subsidy share to 38.5% of total subsidy burden for FY11. Now upstream companies like ONGC will have to bear Rs 30,000 crore in FY11, reports CNBC-TV18, quoting Sources.

According to CNBC-TV18's estimates, SBI's January-March quarter net interest income (NII) is seen at Rs 9176 crore, a growth of 37% as against Rs 6721 crore, same quarter previous year. Its Q4 PAT is seen up 59% at Rs 2963 crore versus Rs 1866 crore, YoY.

Midcap gainers: Kalpataru Power, State Bank of Mysore, CMC, KSK Energy and Berger Paints were up 2.5-6.5%.

Midcap losers: Page Industries, SKS Microfinance, Greaves Cotton, Godrej Proper and Bharat Forge were down 1.4-2.6%.

Smallcap gainers: Unisys Soft, Prime Securities, Ashapura Mine, Nirlon and Money Matters were up 4-6%.

Smallcap losers: Empee Sugars, R M Mohite Inds, Apar Ind, Halonix and Consolidated Co were down 4-10%.

Stocks to watch

Gammon Infrastructure Projects Ltd after it said it would consider issue of preference shares to Gammon India on May 19.

Software services firm CMC Ltd after it won an order from the Life Insurance Corporation of India.

Shalimar Paints after the Financial Express cited sources as saying the paints maker was up for sale and Kansai Nerolac and Sherwin-Williams were in the race to buy it. The company's chief operating officer, Sandeep Sarda, told the newspaper it does not comment on market speculation.

The US markets slid as technology stocks unraveled, and investors worried about the euro zone debt crisis and its impact on the economic recovery. Asian markets also trading in red.

Market cues:
Results Today: SBI, Bajaj Finserv, HT Media, Opto Circuits, Prestige Estates, Petron Eng
FIIs net sell USD 825 million in the cash market on May 13
MFs net buy Rs 14.80 cr in cash market on May 13
NSE F&O Open Int was up by Rs 4393 cr at Rs 1.42 lakh cr
MSCI India additions: Titan Ind, Shriram transport, Mundra port, Dabur, Bank of India, Asian paints

F&O cues:
Total Futures Open Int up Rs 1008 cr and Total Options Open Int up Rs 3385 cr
Total Stock Futures OI add 1.63 cr shares in OI
Nifty Futures OI add 12.11 lakh shares in OI
Nifty discount at 10.3 pts Vs premium at 14.15 pts
Nifty Open Int PCR at 0.96 Vs 1.05
Total Put sheds 4.61 lakh shares in OI
Total Call adds 58.55 lakh shares in OI
Highest OI Outstanding At 5400 Put, 5800 Call and 5600 Call
Nifty 5500 Call adds 29.10 lakh shares in OI
Nifty 5600 Call adds 16.61 lakh shares in OI
Nifty 5400 Call adds 7.35 lakh shares in OI
Nifty 5700 Call adds 3.5 lakh shares in OI
Nifty 5400 Put adds 3.12 lakh shares in OI
Nifty 5600 Put sheds 9.05 lakh shares in OI
Nifty 5200 Put sheds 2.3 lakh shares in OI
Nifty 6000 Call sheds 2.22 lakh shares in OI
Nifty 5800 Put sheds 1.06 lakh shares in OI
Nifty 5500 Put sheds 1.06 lakh shares in OI
India VIX up 4.02 % at 21.46
Deccan Chronicle, PFC and Orchid Chem in F&O ban

(With inputs from Reuters)