Stay cautious, buy on dips: Experts

It was very good day for the market, as bulls had an upper hand throughout the day. The BSE Sensex closed near it psychological 14000 mark and Nifty closed above 4150. All BSE sectoral indices ended in positive. Realty, power, bank, FMCG, capital goods, IT and oil & gas stocks witnessed good buying interest.

After yesterday’s 176 points loss on the Sensex, it has rebounded strongly in opening trade following positive cues from global markets, which had surge on the back of fall in crude price to USD 136 per barrel from all time high of USD 146 per barrel.

But following Iran test firing a missile, crude has rebounded from USD 136 levels to USD 137.66 per barrel on the Nymex.

The Sensex was up 614.61 points or 4.60% at 13964.26, and the Nifty was up 168.55 points or 4.23% at 4157.10.

Amit Dalal of Amit Nalin Securities feels that the current rally in markets has come as a complete surprise to most people. He thinks that today markets saw a short covering. He feels that if oil remains low, then maybe the market would find itself going up further towards the result season starting and even the vote of confidence, on July 21.

He however, prescribes caution. “I am positive on the rally but I am not positive on the day-to-day trend, you will see ups and downs, it is not going to be one-sided for a long period of time.”

“Unlike traders, I like a market going down to buy rather than buying at every high. So I am much happier getting a market which is cheaper rather than more expensive. So in terms of a rally continuing for three months time or a period, which should bring in momentum, firstly oil needs to go down substantially. Secondly we need FII flows to get positive without these two things every rally has an easy peak on itself,” Dalal said. He suggests that at every rally, one should sell and buy again, if the market comes down.

S Ranganathan, LKP Shares feels that it is too early to give out any call on individual stocks. “We have been quite cautious on the market for quite some time. Now at current levels, the markets are trading at about 14-times one-year forward earnings. If you look at the broader markets in particular, the midcap space - you do have a lot of individual stocks that are trading at valuations cheaper than the Sensex valuations. Having said that, it’s a very difficult call to really give out stocks in any particular sector at this point in time because the way bond deals were moving and the way the inflation is panning out, it’s going to take a while before we really see some of the sector favourites really coming back into the fore.”

Ranganathan feels that one needs to again look at the quarterly numbers that are likely to come out because we do see a lot of earnings downgrade this quarter and even if it weren’t to really come out in this quarter, we could see some of those happening in the second quarter. I wouldn’t expect any positive surprises in the earnings season this time around; most of us are expecting downgrades whether it is financials, banking or most of the interest rate sensitive sectors.” However, there are pockets of stocks individually in technology, engineering and industrial sector, he feels. “These are some of the three sectors in particular where the companies have the potential to deliver growth rates between 25%-35%,” he said.

The relief rally of more than 3% of market gains, which came in today was due to two important events - one was crude prices falling by around USD 9-10 per barrel in the last two days. Secondly, the uncertainty about the Left withdrawing support had finally cleared with yesterday’s announcement. The Samajwadi Party and the Congress pact shows that nobody wants an early election.

Vikram Kotak, CIO, Birla Sun Life Insurance said that the relief rally of 3% today was due to crude prices cooling off and the announcement of the Left yesterday. He feels that there is definite positivity in the market. He feels that there maybe some surprises from these quarter numbers. Kotak feels the market is near the bottom.