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KN Vaidyanathan, CEO, Alchemy Capital Management, doesn’t see much upside in the immediate short term. However, he feels buying opportunity is round the corner. “The December numbers may possibly trigger that buying opportunity when valuations will look at lot more compelling,” he said.
“Between now and maybe the end of January, this phase for buying and hold and wait out because the result is not going to be in 2009. It could be maybe sometime in 2010 where one will start seeing numbers coming up again. But the great buying opportunities would be now and the end of January,” he added.
Sudarshan Sukhani of Technical Trends adds the market has been in a very narrow trading range — 2,550 and 2,750 — for ten days now. That last time it got into a narrow trading range, Sukhani says, was in August after which it broke down. “My point is: the trading range is a point of decision. We are going to see a big trending move out of this range, either up or down,” he said, adding, “My sense is that we are going to break down again. There are a lot of other technical indicators that give the same impression.”
Here is a verbatim transcript of KN Vaidyanathan and Sudarshan Sukhani’s interview on CNBC-TV18. Also watch the accompanying video.
Q: What's your sense of what we have in store for us for the rest of December?
Vaidyanathan: It is too short a perspective. I would not agree that this market is doing nothing; there is a lot that is happening out there. This is possibly the toughest phase of the market where you literally have a street fight between some people wanting to push it down and others supporting it and showing terrific resistance. That augurs well for a healthy market; we need to have that kind of resistance. One cannot just give up without a fight. Where do I see the market? As I have said earlier, if you take a very short-term view, I don’t see much upside. Do I see downside? Yes, maybe.
Buying opportunity, however, in the market is just round the corner. The December numbers may possibly trigger that buying opportunity when valuations will look at lot more compelling and therefore you would start seeing some buying in the market. We have actually started seeing some smart buying in the market — long-only FIIs have come in. Between now and maybe the end of January, this phase for buying and hold and wait out because the result is not going to be in 2009. It could be maybe sometime in 2010 where one will start seeing numbers coming up again. But the great buying opportunities would be now and the end of January, that’s the way I am looking at the market today.
Q: How are you reading the trend and the kind of sideways moves of the last couple of days?
Sukhani: I am going to give you a very short-term perspective because that’s what we trade on. It has been ten days now during which the Nifty has essentially remained in a trading range between 2,550 and 2,750. It has moved out for a few hours or sometimes minutes but that is the trading range. 200 points for ten days is pretty narrow given the volatility that we had seen earlier. Have we seen this before? The answer is: yes. During August, we went into a similar trading range and it frustrated almost all of us. The impression, then, was it could go up that maybe it would breakout, come to 4,200-4,400 levels. Eventually, the markets decided to fall. My point is: the trading range is a point of decision. We are going to see a big trending move out of this range, either up or down. Depending on your perspective, one could make a toss and choose whichever direction you wish. My sense is that we are going to break down again. There are a lot of other technical indicators that give the same impression. Any analysis can go wrong and with that caveat, I would say we are heading for lower levels.
Q: How much do you think a fiscal or a monetary policy package can do to turn the sentiment around, you think that could be a material direction lender for this market?
Vadiyanathan: To a small extent, it offsets the negative sentiment because the market is in for some bad numbers on the back of October and you have this promise of a fiscal and monetary stimulus that is an offset. However, the bigger impact is from an equity market standpoint, the equity market will happen when the interest rate market has happened. Even today, when you walk in to a bank you can open an FD for a year at 10.5% or some at 11%. That has to fall so all of these are giving cues that that market move will start and if that plays out over the next two–three months to bring it down to a level where the risk reward is not exciting in fixed income, the action would move to equities. Which is why I said the next two months that you see is when there is buying opportunity in the equity market.
Q: What about the heavyweights that are supporting the market: Tata Steel and SBI?
Sukhani: We are all talking about Tata Steel. However, we must remember that it was Rs 500 plus, three months ago and at Rs 1,000 plus, six months ago. So don’t think of it in percentage terms but in terms of absolute numbers. A Rs 10 gain in this stock at Rs 165 doesn’t change the nature of the stock’s movement. So I don’t know how much more of a downside it has but at this point there is no base building and [there is] no sense that the worst is over. So I would just treat this as random moves.
SBI should have been a much better story because of the background — the fundamental news of interest rate cuts — but as I explained earlier, the SBI stock is giving an impression of a significant breakdown in its long-term chart. That frightens me, so I would prefer to stay away from banks for some time.
Q: If the call is that a buying opportunity might emerge between now and January, which pockets are you most comfortable going out and doing that in?
Vadiyanathan: Our view is those pockets are individual companies, this is not going to be a sector play. This is individual company, we have about 15-16 stocks which are on our radar where we have done an analysis. We have put emphasis on a lot of balance sheet indicators apart from the traditional growth and topline and bottom line growth. Balance sheet indicators, those to me would be the core.
It may include one or two banks, that would include a couple of infrastructure plays, that would include a couple of pharmaceutical plays but it’s certainly not skewed by sectors as much as: this a great or good company that can survive. The thing is: you need people who can survive during bad times and thrive in good times. So the focus has to be to pick people who can survive through the next year or so of bad macro-economic situation playing out and then thrive thereafter. Those would be the buying opportunities I would say over the next two months.
Q: Are charts of companies like DLF and Unitech suggesting that they have done their downward leg for the moment?
Sukhani: No, they are not. Just two days ago, both made their new lifetime lows. At Rs 165-180 for DLF, we do feel this is a buying opportunity but that is our personal perception. The charts are telling us that the downside is intact; we have to give those stocks base-building time before we can even begin to look at them and say: okay, the worst is over. Since, it’s still getting worse, there is nothing on the charts.
Source: news.moneycontrol.com
“Between now and maybe the end of January, this phase for buying and hold and wait out because the result is not going to be in 2009. It could be maybe sometime in 2010 where one will start seeing numbers coming up again. But the great buying opportunities would be now and the end of January,” he added.
Sudarshan Sukhani of Technical Trends adds the market has been in a very narrow trading range — 2,550 and 2,750 — for ten days now. That last time it got into a narrow trading range, Sukhani says, was in August after which it broke down. “My point is: the trading range is a point of decision. We are going to see a big trending move out of this range, either up or down,” he said, adding, “My sense is that we are going to break down again. There are a lot of other technical indicators that give the same impression.”
Here is a verbatim transcript of KN Vaidyanathan and Sudarshan Sukhani’s interview on CNBC-TV18. Also watch the accompanying video.
Q: What's your sense of what we have in store for us for the rest of December?
Vaidyanathan: It is too short a perspective. I would not agree that this market is doing nothing; there is a lot that is happening out there. This is possibly the toughest phase of the market where you literally have a street fight between some people wanting to push it down and others supporting it and showing terrific resistance. That augurs well for a healthy market; we need to have that kind of resistance. One cannot just give up without a fight. Where do I see the market? As I have said earlier, if you take a very short-term view, I don’t see much upside. Do I see downside? Yes, maybe.
Buying opportunity, however, in the market is just round the corner. The December numbers may possibly trigger that buying opportunity when valuations will look at lot more compelling and therefore you would start seeing some buying in the market. We have actually started seeing some smart buying in the market — long-only FIIs have come in. Between now and maybe the end of January, this phase for buying and hold and wait out because the result is not going to be in 2009. It could be maybe sometime in 2010 where one will start seeing numbers coming up again. But the great buying opportunities would be now and the end of January, that’s the way I am looking at the market today.
Q: How are you reading the trend and the kind of sideways moves of the last couple of days?
Sukhani: I am going to give you a very short-term perspective because that’s what we trade on. It has been ten days now during which the Nifty has essentially remained in a trading range between 2,550 and 2,750. It has moved out for a few hours or sometimes minutes but that is the trading range. 200 points for ten days is pretty narrow given the volatility that we had seen earlier. Have we seen this before? The answer is: yes. During August, we went into a similar trading range and it frustrated almost all of us. The impression, then, was it could go up that maybe it would breakout, come to 4,200-4,400 levels. Eventually, the markets decided to fall. My point is: the trading range is a point of decision. We are going to see a big trending move out of this range, either up or down. Depending on your perspective, one could make a toss and choose whichever direction you wish. My sense is that we are going to break down again. There are a lot of other technical indicators that give the same impression. Any analysis can go wrong and with that caveat, I would say we are heading for lower levels.
Q: How much do you think a fiscal or a monetary policy package can do to turn the sentiment around, you think that could be a material direction lender for this market?
Vadiyanathan: To a small extent, it offsets the negative sentiment because the market is in for some bad numbers on the back of October and you have this promise of a fiscal and monetary stimulus that is an offset. However, the bigger impact is from an equity market standpoint, the equity market will happen when the interest rate market has happened. Even today, when you walk in to a bank you can open an FD for a year at 10.5% or some at 11%. That has to fall so all of these are giving cues that that market move will start and if that plays out over the next two–three months to bring it down to a level where the risk reward is not exciting in fixed income, the action would move to equities. Which is why I said the next two months that you see is when there is buying opportunity in the equity market.
Q: What about the heavyweights that are supporting the market: Tata Steel and SBI?
Sukhani: We are all talking about Tata Steel. However, we must remember that it was Rs 500 plus, three months ago and at Rs 1,000 plus, six months ago. So don’t think of it in percentage terms but in terms of absolute numbers. A Rs 10 gain in this stock at Rs 165 doesn’t change the nature of the stock’s movement. So I don’t know how much more of a downside it has but at this point there is no base building and [there is] no sense that the worst is over. So I would just treat this as random moves.
SBI should have been a much better story because of the background — the fundamental news of interest rate cuts — but as I explained earlier, the SBI stock is giving an impression of a significant breakdown in its long-term chart. That frightens me, so I would prefer to stay away from banks for some time.
Q: If the call is that a buying opportunity might emerge between now and January, which pockets are you most comfortable going out and doing that in?
Vadiyanathan: Our view is those pockets are individual companies, this is not going to be a sector play. This is individual company, we have about 15-16 stocks which are on our radar where we have done an analysis. We have put emphasis on a lot of balance sheet indicators apart from the traditional growth and topline and bottom line growth. Balance sheet indicators, those to me would be the core.
It may include one or two banks, that would include a couple of infrastructure plays, that would include a couple of pharmaceutical plays but it’s certainly not skewed by sectors as much as: this a great or good company that can survive. The thing is: you need people who can survive during bad times and thrive in good times. So the focus has to be to pick people who can survive through the next year or so of bad macro-economic situation playing out and then thrive thereafter. Those would be the buying opportunities I would say over the next two months.
Q: Are charts of companies like DLF and Unitech suggesting that they have done their downward leg for the moment?
Sukhani: No, they are not. Just two days ago, both made their new lifetime lows. At Rs 165-180 for DLF, we do feel this is a buying opportunity but that is our personal perception. The charts are telling us that the downside is intact; we have to give those stocks base-building time before we can even begin to look at them and say: okay, the worst is over. Since, it’s still getting worse, there is nothing on the charts.
Source: news.moneycontrol.com
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