Nifty to rally 250 pts if govt sails through: Karvy

Ambareesh Baliga of Karvy Stock Broking feels that post July 22 the markets will move very sharply either way. If the government sails through, one could  see Nifty going up by at least around 200-250 points from here, he said.

However, Baliga said that if the government falls one could see the bottom for the market going off and this is being shown in the sort of premiums been seen for both calls and puts because people don’t want to take a chance and there are a lot of people who are actually buying the calls and puts and sitting tight because the markets can move either way. So whichever way it moves one could end up making money, he said.

Excerpts from CNBC-TV18’s exclusive interview with Ambareesh Baliga:

Q: What did you make of the Wipro and Satyam numbers first, how do you think the stocks will open?

A: The Wipro numbers were decent and the topline was better than expected although the bottom line was a bit lower and these numbers will be taken well by the markets. Even the Satyam numbers, at least the preliminary numbers mentioned, are extremely decent.

Q: How nervous is the market about the political event next week and would it have some long-term repercussions in terms of the market direction from there?

A: At least for the time being the markets would be very circumspect about the political scenario because today if you see most of the international cues are extremely positive whether its oil, or international markets. Moreover, near to home the inflation figures are better than what people were expecting. So in spite of all these positive cues, and inspite of the market opening better today, the markets will not sustain because of this uncertainty as far as this political circus is concerned. So this will be the only needle which can spoil this movement which we could see in the morning today because even as of now, it seems to be a touch and go as far as July 22 is concerned. Also, post July 22 you could see the markets moving very sharply either way. If the government falls you could really see the bottom for the market going off and in case the government sails through, you could actually see Nifty going up by at least around 200-250 points from here. This clearly is being shown in the sort of premiums which we are seeing for both calls and puts because people don’t want to take a chance and there are a lot of people who are actually buying the calls and puts and sitting tight because the markets can move either way. So whichever way it moves and if we have the calls and puts, you could end up making money, so that’s one of the reasons why the premiums are so high for both the calls and puts.

Q: What about the infrastructure lot, which was also rallying yesterday, stocks like JP Associates, Punj Lloyd, IVRCL - how would you approach that space now?

A: I will be slightly more positive on the infrastructure space as compared to the pure realty plays. So possibly in a bounce back these are the stocks, which could bounce back better than the realty space. But, if you are talking from a fundamental long-term investment angle, other than Punj Lloyd and possibly Hindustan Constructions-other plays like IVRCL I would possibly ignore from an investment point of view. At these levels it makes sense in investing in stocks like HCC and Punj Lloyd. If one is able to ignore the possible 10%-15% downside then one needs to look at least 40%-80% upside over the next one to one and a half years. But then before that we could see a downside.

Q: Two other stocks and how you would approach them - Polaris after the numbers yesterday and Renuka in the sugar pack?

A: We are extremely positive on as far as the sugar prices are concerned; like we have already seen Rs 55 increase per quintal and especially the way the rupee is behaving, even that is positive for the sugar industry. Even the demand-supply gap that was there - you had oversupply over the last one to one and a half year; this should get over in the next one year or so. So overall for the sugar industry, better days are ahead at least if you are looking at the next twelve-eighteen months. So a stock like Renuka Sugar and Balrampur Chini are the ones that one can buy and although Balrampur Chini has some negatives especially after the High Court verdict but still Renuka is one pick from sugar space, which one should have in their portfolio.

Q: What do you expect to see over the next two trading sessions - today and Monday before the confidence vote on Tuesday? Is it volatility, or the market becoming very quiet with traders on either side staying away?

A: Even if we see decent amount of volatility there will also have all sort of noises coming from Delhi with a lot of speculation as far as vote of confidence is concerned. So based on the rumours on news which keep coming all the time you will have markets moving up and down because of which you will have volatility. But the markets would be subdued, I don’t see too much of a rally from here at least for the next 2-3 trading sessions at least till Tuesday, till the vote of confidence is done. So basically the markets would be volatile but at lower levels.

Q: What is the trader psyche right now, if you do get a bit of a bounce back at sometime in next week, are people looking for shorting opportunities or are they confused about the way this past fortnight has shaped up?

A: The people are quite confused and more than that it is the fear. So any upside one gets in this market people are normally utilizing it to go short or sell the existing positions. But things will change post-Tuesday and it could be either way. So in case the government wins the vote of confidence, you will have lot of these traders and investors coming back to the market, especially those who are sitting on the fence could in fact come back to the market and start buying. Possibly then we could say that whatever we saw in the last couple of days was the bottom for the market. But in case, if they lose the vote of confidence, then we will see lower levels than what we had seen in the recent past. So you will have a whole lot coming back, like selling in the market again.

Q: Do you think it's good value and pick up a stock like Polaris at Rs 80 at Rs 6 PE or you can’t rely because of the volatility in performance and let it be?

A: I cannot rely on the volatility and the performance of this stock and that’s the reasons why it gets such a low multiple. I would still play with the safer bets, in the IT sector like Infosys or a Satyam or a Wipro than try my luck with Polaris.

Q: After what’s happened on the forex front, would you avoid the midcap IT space?

A: Yes, it is better to be with the large boys who have a better control especially over their forex transactions as compared to the smaller boys. So it’s better to be with the top three than go with the likes of Polaris or MindTree or such.