Mumbai,November 27 : Ambareesh Baliga, chief operating officer, Way2Wealth expects Nifty to see support in the region of 4,700 levels. In CNBC-TV18’s special show Investor Camp, Baliga said, “In case it holds on there for the next couple of days, couple of weeks consolidated on higher levels then one can take a call and start investing now.”
But in case Nifty breaks this 4,700 level decisively then technical reasons would be enough to pull it down to 4,200 levels, he added.
Meanwhile, citing sector specific views, Baliga suggests investors to stay away from infrastructure sector as of now. However he feels that if one wants to invest in this sector then he should be employ cash which is not required for the next two or three years.
From the commodity space which has also witnessed a dramatic fall, he prefers mining stocks like NMDC , Coal India more than metal stocks.
“Today, we are talking of buying into legal mining stocks because most of the illegal mines have anyway closed down which means that going ahead it could be a good time for legal mining stocks”.
Below is the edited transcript of Baliga’s interview with CNBC-TV18. For the compelte interview watch the accompanying video.
Q: Where do you see the market heading?
A: See markets taking support in this region of 4700. In case it holds on there for the next couple of days, couple of weeks consolidated on higher levels then one can take a call and start investing now. But in case we break this 4,700 level decisively, it’s not fundamental reason but technical reasons itself would be enough to take the markets down to 4,200.
Q: You have a good sense of what the retail crowd and some of the trading crowd in Bombay is up to. How are people approaching the markets and did people lose a lot of money in the last few months, in midcap positions especially?
A: Approaching the markets I think everyone is running away. No one wants to talk about equities. Equity is a four letter word as of now. If you want to talk to them about gold, fixed income – you are most welcome to talk. But if you are going to go and talk to them about equities, people don’t have time for you.
That’s the ground reality as far as retail broking houses or wealth management houses are concerned. People have been investing at every fall in the last one year. More often than not most of them have lost and are still sitting on losses as of now. I am talking of people who have actually invested their own money. Those who invested borrowed money are completely finished as of now.
Q: A big concern for the midcaps in these last few weeks has been all the talk about margin funding and that has put a lot of pressure on midcaps. Could you walk us through what’s happened on some of these individual names in terms of margin funding pressure? How can one avoid that kind of situation?
A: Most of the margin funding currently happens or used to happen in midcaps. Right now I suppose the positions are much lower than what it was about six months back. This is because most of the largecaps, liquid stocks are there in F&O. People don’t necessarily need to take margin funding in those stocks.
Typically margin funding is taken in midcap stocks where volumes are quite low comparatively. So, whenever there is a fall in those particular counters for whatever reasons, it could be fundamental reasons, results or it could be possible that large murky investor or an institution which is holding that stock exits or sells a decent quantity. The market can’t absorb it because obviously the stock falls. When the stock falls, automatically those who have funded the stock, financiers call for extra margins.
Looking at the overall market conditions if the investor or in some cases the promoter of that company who has taken funding against his stocks is unable to give extra margin, then the financier doesn’t love the stock, he doesn’t have a call on that stock and he just exits. As long as he is able to get his capital back he will sell. Because of which we have seen number of these stocks cutting possibly 30-40% in just about two-three days time because they just need to exit and protect the capital.
Q: What should one do with infra? Are you recommending anything?
A: I was recommending infra, no doubt. I would still recommend. Personally speaking I would say that it’s still a good time to invest. But if you ask me advice as an investor, as my client, I would probably say stay out which I have been saying for a while.
The reason is today if you are investing, you should be investing the cash which you possibly don’t require for the next two or three years. You should be investing the cash for which you are not even responsible to your wife. This is because tomorrow your family should not ask you as to why you invested in equity. You should possibly invest only that cash in the markets today because there is mayhem and panic all around.
Historically speaking, generally this sort of a situation is the best time to invest. But if you are investing today, be prepared to see either 20-30% sort of a cut in the stock which you have bought. This is because fundamentally speaking may not be but technically there is a possibility of that sort of a cut.
At that point of time one should not be doubting himself because of which whatever one buys should not be on based on hear and say. Do a proper study and then buy so that in case it falls as a 20-30%, you should have the confidence to buy some more at those levels.
Q: Let me ask to you about three stocks which when we a camp which was about a month and a half back were trading at a completely different valuation and level. Which of these three would you recommend buying now – Titan , Jubilant Foodworks or VIP ?
A: None of them because Titan seems overrated because the sort of a move which we are seeing in that stock for variety of reasons. Even as of now I am not saying that the company is not doing well. But the problem with all these companies or stocks is that expectation levels are high.
When the expectation levels are high and they are unable to meet those expectations, people will start dumping those stocks. For example a company which has an expectation level of performing 40-50% year on year and it starts performing at 35%; people will start dumping it.
Other issue with couple of these stocks is consolidated holdings. When part of those consolidated holding are exited to a certain extent, it creates a lot of pressure on that stock. That’s exactly what we have seen in Titan and Jubilant. So, at this point of time I will not recommend any of these three.
Q: What about commodity stocks, metal stock, iron ore stocks? Over there as well the fall has been quite dramatic.
A: More than metal stocks I would suggest mining stocks at this point of time.
Q: You mean Sesa Goa and those kind of stories?
A: Not Sesa Goa. Sesa Goa has its own issues but something like NMDC. When one talks of mining, not metals – Coal India. Because of the kind of fall which we have seen thanks to the Mining Bill but most of the negatives are already priced in. Today, we are talking of buying into legal mining stocks. Most of the illegal mines have anyway closed down which means that going ahead it could be a good time for legal mining stocks.