Nifty likely to cross 5,400 levels: Deven Choksey

The Nifty is likely to cross 5,400 levels, said Deven Choksey of KR Choksey in an interview to CNBC-TV18. "There are a lot of factors which suggest that the market has to move up from current levels. The rupee staying at around 47 to the dollar is an invitation for foreign inflow to come into the market. The spread of monsoon and the prospects of inflation reducing are positives. We should be seeing earnings surprise coming in from this quarter as well. I feel we may cross 5,400. It is a matter of time, whether it happens before the earning season or after the earning season I do not know."

Yesterday, markets turned weak in the second half of the session as high beta sectors like real estate and metals slipped. Banks and autos traded weak as well. The Nifty and Sensex ended lower by 48 and 143 points, respectively.

Q: What do you think—is there life beyond 5,350-5,400 or that is the extent of the upside over the next few days?

A: I believe that there is a possibility for the market to go up because there are lots of factors, which are suggesting that the market has to move up from the current level. Rupee staying at around 47 to a dollar is an invitation for foreign inflow to come into the market. Of course I do understand the structural changes which are happening into America, Europe and even in China, which is possibly restricting the kind of a buying happening into the market, which otherwise would have attracted money much faster than what we have seen at this point of time.

Along with the spread of monsoon and prospects of inflation reducing—all these things are appearing very positive and we should be seeing earning surprise coming in from this quarter as well. All these things put together my view is that yes, you are going to see the upside, probably you may see 5,400 also crossing, it is a matter of time whether it happens before the earning season or after the earning season, we will have to feel that particular period.

But I see a reasonably good prospect for the markets to go up and that is where my viewpoint is that, yes, amount of money, which at this point of time is relatively capped would also start coming in because once you see the levels going above, possibly more technical traders also would enter into the market who at this point of time stay muted because of the rangebound movement of the market.

Q: We were just discussing Reliance with an analyst. There seems to be some set back on the D6 ramp up for which most analysts are marking down their EPS estimates for FY11. Do you think it could be a temporary setback?

A: So far the management of the company hasn’t opined on this particular subject as much negative. The last take was that by the end of this year throughput to increase to 75 mmscmd and it could probably stay between 75 and 80 mmscmd. From that perspective, nothing has changed so far but yes, I think I do take particular possibility into calculation because transmission of gas is going to be an issue given the kind of infrastructure which requires to be ramped up.

If that doesn’t get ramped up in sufficient amount of time then possibly despite of possibilities you may not get the kind of a throughput which you are expecting but then in that case you need to look at the worst case scenario kind of an impact. I think that 60 mmscmd is going to be a minimum kind of a level at which the company is going to operate maybe on a higher side, definitely for sure, given the possibility of higher transmission of gas.

But suppose if they operate at 60 mmscmd then probably the EPS impact is not going to be as significant as people are fearing about possibly—I believe that against Rs 66-67 that we have been calculating on 75-80 mmscmd kind of a throughput, we may end up with around 63-64 kind of an EPS, which could possibly mean that around 4-5% kind of a fall from current level. But that is the worst kind of an impact—if that doesn’t happen.

Q: What would you tell investors on ABB now with the open offer opening today?

A: There are two ways in which you can look at this particular company. One is that you are sitting on a brilliant prospect of next ten years of growth story in India and this company definitely is going to participate. Most importantly, it is the promoters of this company who are buying this company’s shares. So from a perspective of looking at this particular company over a longer period of time, it is going to be a very solid long-term kind of a play as far as this company is concerned.

But yes, in the shorter-term, given the kind of last quarter’s results and even last year’s results, if you look at it, it is quite shadowing the kind of a prospect for the current year as a result of which we may not good result and the stock is already quoting at a higher valuation. In the short-term i.e. next six months to nine months kind of a period, the stock may not perform but beyond that it should be performing.

Those investors, who would like to take a look at this company probably after offering into the buyback, may get a chance at around 800 levels and probably 10% kind of again if they want to play with, they may partly book some amount of holdings from the current levels.

Q: Have you been tracking this saga of the battle for Parkway and how do you look at Fortis as a stock then?

A: The Company from the footprint point of view, the kind of hospital network that they will create, ultimately through Parkway’s acquisition, would be a kind of a good network that they would have. Now, how exactly it would pan out into kind of a bottom line profit? That is a little early for me to even comment on that aspect.

But as I see it, I think both these groups have been taking baby steps and probably factoring this particular aspect that the other player is going to increase the open offer price. So from that point of view, I am not too surprised that Khazanah has only increased by USD 3.85 per share. I think that maybe Fortis may end up taking this particular offer upto 3.9-3.95 per share that is what my reading is at this point of time.

Q: If your call is that the Nifty can cross 5,400, what do you expect it to carry it? Which sectors do you think might lead a breakout?

A: It is an important one because you are going to see some participation coming largely from the capital good space particularly players like Larsen & Toubro and BHEL—both will have to give kind of good amount of upside and both of them are showing that kind of a promise both from the point of view of prospects as well as from the result in the season. Along with that there would be some amount of participation coming from bank, particularly the private sector banks, I think they would be definitely moving up.

State Bank of India (SBI) may not go down but to go up it will require sufficient amount of new buying taking place in this particular counter otherwise I think some of the FMCG companies like ITC and Hindustan Unilever Limited (HUL)—both are likely to surprise on a positive side given the kind of a low input cost that they are enjoying. Probably they may end up giving better results in couple of pharmaceutical companies along with. So you will have a mix bag in respective sectors.

You will find heavyweights missing particular likes of Reliance and some of the commodity stocks because of the global environment but otherwise from the earning part of view they are equally looking good at this point of time.

Q: Can you open a long here or would that be a risky trade at 5,300 Nifty?

A: No, that it is still a stock specific market. One is getting opportunity at the respective stocks levels. If you want to look at the Nifty in particular, I think the technical levels definitely suggest that one should go long in immediate terms. I do believe that there is an upside potential for this particular market given the kind of positives that I talked about but the yo-yo moment is going to continue for this particular market along with the global market for the variety of reasons.

So till such time, we see some amount of follow-off buying coming in and that is where we are all putting our eyes on. I would not say that we will go lock, stock and barrel into the market and opening up all long position, I would still remain stock specific because that is where one can make money in this kind of an uncertain market.

Q: Do you track Everonn Education? That has been a star mover the last couple of days?

A: Of late I have not tracked this particular company fully but I do like this particular space and this company’s original business plan in which they have been moving ahead, they were suggesting that they are going to ramp up numbers very significantly going forward in this financial year and thereafter. But I am not too sure, last two days what has made it gone up by 10%. From that perspective I do not know, but yes, I do like this company’s business model for sure. I do believe that this company has lot of potential going forward. Of course the valuation would be a subject at which one will have to play around.

Source : Money Control

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Tags: ABB, Deven Choksey, NSE

Category: Stock-News