Lighten Up Positions On Every Pullback, Says Geojit BNP Paribas  

I think it’s basically lack of participation. If you actually go to see and reflect upon the last fortnight of volumes, foreign funds have been relentless. Of course, the mood of year and holidays is keeping participation away for some time. Secondly, there is no great conviction and confidence coming because people now want the year to get over with. They are looking forward to the month of January in terms of the Budget expectations. According to some verbatim that we already had -- some from the Finance Minister himself -- it seems it is going to be a budget, which is going to be growth oriented and bold. I hope it gets delivered on those lines. My sense is that with the expiry next week on the futures and options (F&O) front, I don’t think we are going to see any great fireworks either on the upside or downside. At best, maybe 50-60 points downside in Nifty and 150-200 points on the Sensex could be there. But then again, people who are short on the F&O, they would want to cover. So, there will be support coming in. At the same time, some impact on the global front is also creating a little bit of nervousness in terms of new slope. So keeping this in mind, it’s only prudent that we say goodbye to 2016. We could see some buying coming in at 7,950 or 7,900 on the Nifty spot.

My views were clear on metals. There is no reason for anybody to jump on the metal stocks because there are no fundamental triggers, which can support the levels where they are trading or even move higher. The input costs have moved up. Flat and long product prices have seen an increase but not significant enough where the profitability and EBITDAs are going to jump to 20-30 percent. Moreover, export markets are still evasive because you have China dumping. I only expect that coming year would be a year wherein if the government starts spending on infrastructure, which they have been very vocal about. Yesterday, Nitin Gadkari spoke about Rs 90,000 crore budget allocation for 14,000-15,000 kilometre national highways, expressways and freeways. So, if the government starts spending, then possibly the consumption of metals will start going up to an extent, which can give comfort. But if I look at the run-up in Vedanta from Rs 70 to Rs 225, I would be a fool to buy it at that level.

The is a fear because of the demonetisation, and because Mr Rahul Gandhi has gone and given some request to the Prime Minister for farm loan waiver. So now, if even some percentage of that is considered, then given the fact that you have the public sector banks who have large exposure to priority sectors i.e. agricultural, they would be the first ones to suffer. The recent unfortunate incidents of some private companies, as well as public sector bank employees, in particular branches getting involved in unwarranted things, could also be a reason. Wherein if there is a larger investigation and if something more is found, then maybe there is some high-level scrutiny etc.

Go on a holiday! [laughs] What I have been advising is that it is only prudent to lighten up in case if you have purely short to medium-term views because we are not going to see any meaningful pullback which will be sustainable. So, purely from that point of view, use pullback-- if you get any like we got last Friday -- to lighten up. Yesterday was the greatest day to lighten up [position] on Reliance Communications because I don’t believe that whatever has happened is going to throw in so much of positivity that they are going to get slim and trim on the debt front. So use recoveries to lighten purely from a short to the medium-term point of view. Be very selective in terms of buying; don’t go and buy 100 percent. I have been advising 15-20-25 percent, depending on an individual’s risk appetite. My sense is that all the consumption-driven themes, which have taken a backseat -- be it consumer discretionary, consumer durable, white good appliances, autos or paint companies --these ones would be the first ones to give signs of recovery. The third quarter might be poor and the fourth quarter might be a little bit shade downwards, because slippages may happen. But next fiscal onward, you will have tremendous earnings visibility on these companies. So we have been focusing on that. I am extremely positive on cement, though dispatches are down 20-30 percent. But if Nitin Gadkari has to get Rs 90,000 crore of budget allocation, then you can very well imagine the kind of roads we will have and the infrastructure built up that will happen.