Ashu Madan of Religare Securities joins CNBC-TV18 to give his perspective of the market moves.
Below is the edited transcript of the interview. Also watch the accompanying video..........
Ashu Madan of Religare Securities joins CNBC-TV18 to give his perspective of the market moves.
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: Today we are seeing a bit of a rally for the market. But overall, what is the sense you are getting for the month of October?
A: The problem in the market currently is that it is actually being sold into. In the last couple of months, the kind of corrections we have seen and the level we are in, all the negative news is factored in and known across the streets. Normally, post these events, market falls only on one account that it is overbought. But currently, markets are not even bought; there is no participation, no interest across asset classes, but still, the moment we try to climb 5000-5100, the market tumbles down easily and we are again closer to 4800. That defines logic, which clearly suggests that there is an inherent weakness.
There is indeed no participation in spite of market being bearish to go short at 4800 level that 4200-4400 is on the cards. However, on the other side, would you be buying into at these levels or closer to 5100, it certainly looks like times for short term trading. Unless it decisively crosses 5100, that is the point to buy with some conviction.
Else, even if valuations look attractive, with the interest rates peaking up, rupee deprecation done, and all other macro global factors and domestic, I still feel that this range is very difficult to break.
Q: We are getting the first lot of earnings previews. Just about everyone including yours is indicating that the numbers would be disappointing, people hard scaling their earnings forecast down, some of them even to single digits for FY12 and bringing down the FY13 targets as well. So does this market now deserve to trade 15 times?
A: That’s the reason… you have answered. In spite of all these, at 4800-4900 levels, the way we see FIIs selling also or the fund selling, clearly states this inherent weakness. So probably, that readjustment is on the minds of people and that is why in spite of many positives, even for a shorter term, still we see a bout of selling which clearly suggest that there could be readjustment or rerating on the cards and that is why we see this weakness at these levels also.
Q: There is an increasing view now that getting into 2012, the market will see a big change in tide and move on the upside. Do you think it would be prudent to invest in those banks which have corrected a whole lot for the medium to longer term because of how attractive valuations are and which banks would you pick if at all?
A: I come from a different school of thought because for me, short term prediction is more important. Nonetheless, I am very confident about the next 12-15 months. To give an example, everyone was saying that from Rs 3300 to Rs 2300-2200, SBI is a compelling buy and now we are closer to Rs 1700. Now what? I am not saying that it will not go up or that this is not the time to buy, but I would still buy these stocks or sectors when I have much more conviction and I see the turnaround in the market when the fear skeleton are locked back in globally or on the domestic front. That would be the point of buying.
Q: So is yours a no action strategy at this point in time in the market for an investor?
A: Yes certainly. For a normal investor, sitting on the sidelines is a prudent strategy because there are very few people who can trade the short term market. The cash market has virtually died down; it's all futures and that too options, because of the risk aversions. So it's not everybody's cup of tea.
Currently, talking about the market, people who used to be savvy about the market don't want to talk about the market. That further proves the fact that a normal investor should opt for no trade. An investor who is outside the market, who believes in investing in sectors, stocks for a short to medium term should stay on the side lines.
Q: Is there any outperforming sector at all? You said that as an investor you wouldn't really want people to put in money at this juncture. But what's a relative safe harbor?
A: There is no sector which I would like to mention with conviction. We may see some outperformance during the earnings in sectors like IT, cement, FMCG and pharma, but that's known to all. If you think that there could be some great outperformance or some surprise in the times to come, I don't there is anything currently on the table.
Q: Speaking about earnings, do you think there is any more of a negative surprise that the market is factoring in? Expectations are quite dismal getting into this quarter, but are you factoring it some more of a cut because of issues that have recently evolved?
A: Yes, there could be. As far as the over all macro scene is concerned, reality, telecom, power and metals will be laggards and we will see some outperformance in the sectors I mentioned.
However, there could be some company specific surprises. But I don't think there is anything major; much is known to everyone.
Q: Can you tell us if there is any more of a negative surprise that the market is factoring in?
A: There could be, but I think that barring few companies or sectors which I mentioned as outperformers, the laggards would be reality, telecom, power and metals. Between these sectors, there could be some company specific surprises here and there. However, I don’t think that there is anything major still.
Q: On Airtel and Idea , how much of a negative are you factoring in in this quarter?
A: Telecom as a sector is already underperforming, and these two were the stocks that outperformed the market. If you look at Bharti, it defied the market and the sectors sentiment and outperformed all through the past few months. I think it is more to do with profit booking than to do with this report because in any case, this is the stock. If there is a chance, the way we have seen selling in these stocks which are in much lower levels, it makes a prudent sense and that is why we have seen that in a market like today also that Bharti is down.
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Below is the edited transcript of the interview. Also watch the accompanying video..........
Ashu Madan of Religare Securities joins CNBC-TV18 to give his perspective of the market moves.
Below is the edited transcript of the interview. Also watch the accompanying video.
Q: Today we are seeing a bit of a rally for the market. But overall, what is the sense you are getting for the month of October?
A: The problem in the market currently is that it is actually being sold into. In the last couple of months, the kind of corrections we have seen and the level we are in, all the negative news is factored in and known across the streets. Normally, post these events, market falls only on one account that it is overbought. But currently, markets are not even bought; there is no participation, no interest across asset classes, but still, the moment we try to climb 5000-5100, the market tumbles down easily and we are again closer to 4800. That defines logic, which clearly suggests that there is an inherent weakness.
There is indeed no participation in spite of market being bearish to go short at 4800 level that 4200-4400 is on the cards. However, on the other side, would you be buying into at these levels or closer to 5100, it certainly looks like times for short term trading. Unless it decisively crosses 5100, that is the point to buy with some conviction.
Else, even if valuations look attractive, with the interest rates peaking up, rupee deprecation done, and all other macro global factors and domestic, I still feel that this range is very difficult to break.
Q: We are getting the first lot of earnings previews. Just about everyone including yours is indicating that the numbers would be disappointing, people hard scaling their earnings forecast down, some of them even to single digits for FY12 and bringing down the FY13 targets as well. So does this market now deserve to trade 15 times?
A: That’s the reason… you have answered. In spite of all these, at 4800-4900 levels, the way we see FIIs selling also or the fund selling, clearly states this inherent weakness. So probably, that readjustment is on the minds of people and that is why in spite of many positives, even for a shorter term, still we see a bout of selling which clearly suggest that there could be readjustment or rerating on the cards and that is why we see this weakness at these levels also.
Q: There is an increasing view now that getting into 2012, the market will see a big change in tide and move on the upside. Do you think it would be prudent to invest in those banks which have corrected a whole lot for the medium to longer term because of how attractive valuations are and which banks would you pick if at all?
A: I come from a different school of thought because for me, short term prediction is more important. Nonetheless, I am very confident about the next 12-15 months. To give an example, everyone was saying that from Rs 3300 to Rs 2300-2200, SBI is a compelling buy and now we are closer to Rs 1700. Now what? I am not saying that it will not go up or that this is not the time to buy, but I would still buy these stocks or sectors when I have much more conviction and I see the turnaround in the market when the fear skeleton are locked back in globally or on the domestic front. That would be the point of buying.
Q: So is yours a no action strategy at this point in time in the market for an investor?
A: Yes certainly. For a normal investor, sitting on the sidelines is a prudent strategy because there are very few people who can trade the short term market. The cash market has virtually died down; it's all futures and that too options, because of the risk aversions. So it's not everybody's cup of tea.
Currently, talking about the market, people who used to be savvy about the market don't want to talk about the market. That further proves the fact that a normal investor should opt for no trade. An investor who is outside the market, who believes in investing in sectors, stocks for a short to medium term should stay on the side lines.
Q: Is there any outperforming sector at all? You said that as an investor you wouldn't really want people to put in money at this juncture. But what's a relative safe harbor?
A: There is no sector which I would like to mention with conviction. We may see some outperformance during the earnings in sectors like IT, cement, FMCG and pharma, but that's known to all. If you think that there could be some great outperformance or some surprise in the times to come, I don't there is anything currently on the table.
Q: Speaking about earnings, do you think there is any more of a negative surprise that the market is factoring in? Expectations are quite dismal getting into this quarter, but are you factoring it some more of a cut because of issues that have recently evolved?
A: Yes, there could be. As far as the over all macro scene is concerned, reality, telecom, power and metals will be laggards and we will see some outperformance in the sectors I mentioned.
However, there could be some company specific surprises. But I don't think there is anything major; much is known to everyone.
Q: Can you tell us if there is any more of a negative surprise that the market is factoring in?
A: There could be, but I think that barring few companies or sectors which I mentioned as outperformers, the laggards would be reality, telecom, power and metals. Between these sectors, there could be some company specific surprises here and there. However, I don’t think that there is anything major still.
Q: On Airtel and Idea , how much of a negative are you factoring in in this quarter?
A: Telecom as a sector is already underperforming, and these two were the stocks that outperformed the market. If you look at Bharti, it defied the market and the sectors sentiment and outperformed all through the past few months. I think it is more to do with profit booking than to do with this report because in any case, this is the stock. If there is a chance, the way we have seen selling in these stocks which are in much lower levels, it makes a prudent sense and that is why we have seen that in a market like today also that Bharti is down.
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