Uncertainty Good For An Investor; See Nifty At 9,660 By Mid-2017: Jai Bala
Jai Bala said 7,777 is very critical level for the Nifty and should be watched keenly.
India’s benchmark index, the Nifty 50, has lost more than 400 points in the last four trading sessions, taking it back to levels last seen six months ago. However, according to Jai Bala of Cashthechaos.com, this is just a large correction in a longer-term uptrend.
"We expect the Nifty to climb towards 9,660 sometime by the middle of 2017," he told BloombergQuint in a telephonic interview.
Below is an edited transcript of the interview.
‘Correction In Long-Term Uptrend’
While the Nifty has managed to hold on the 8,000-mark, there is very little to suggest that the worst is over in terms of the uncertainties. What are the charts suggesting right now?
We look at the market from a longer-term perspective. We see the decline on account of the surprise Trump win in the U.S. election as a large correction within the longer-term uptrend. We had forecast in the month of March – when the Nifty started rising from 6,825 – that the market is in for record highs; we are still projecting that.
We expect the Nifty to climb towards 9,660 some time by the middle of 2017. However, what’s going to happen in the next few days will be very important.
We don’t want to see the market go much below 7,777 – that is a very important level for me. In the short term, the market shouldn’t go below that; in fact, I believe it should hold above 7,992.
So, if we see a burst in the market in the next couple of days, then I think the short-term decline is done.
‘Bank Stocks To Lead Markets Higher’
What about the Bank Nifty? The sectoral gauge has shown some resilience in the last three sessions but has failed to close higher.
The banking index is going to be quite helpful in leading the market higher. In the medium to long term, we are looking at a level of 23,000 for the Bank Nifty. One can look at players like Punjab National Bank and State Bank of India from the public sector and Karur Vysya Bank and Axis Bank from the private sector. Even ICICI Bank is likely to do well.
We are looking at record highs for all these stocks. Obviously, this will move in tandem with the Nifty but the Bank Nifty is right now much better off than the 50-share index.
PSU banks, especially Bank of Baroda, have found a new lease of life after the demonetisation move. A word on the PSU banks and whether you see more room on the upside?
We like SBI and PNB more than Bank of Baroda, not that any of the stocks are going to underperform. SBI will lead the market, as it has more weightage in the index. Others may do well in percentage terms.
We expect PNB to scale Rs 180 and looking at record highs for SBI in the region of Rs 350 plus.
Contrarian Bets?
Just carrying on with that theme, do you have a contrarian view on some of these sectors that have been affected by the cash crunch like real estate, cement, jewellery and consumer durables stocks?
Uncertainty is very good for an investor. We want market players to be uncertain about a particular sector. When there is certainty it is not that good. We want people to be unsure.
But that being the case, being contrarian for the sake of being contrarian is not going to help your portfolio. You have got to be patient.
You spoke about consumer durables, but I am more particular about the FMCG sector. I think one can look at HUL, Dabur and Britannia — these are good names. In the short-term, they may fall back to their February 2016 lows. Once it gets there, I think it is going to be a rock solid bottom for these stocks and it will be a good buying opportunity.
But don’t be brave and stand in front of the market at this point in time. Be a bit more patient. These sectors will definitely provide opportunities but right now is not the moment.
IT: Surprise Package?
Besides the ones we have talked about, which other sector would you be comfortable buying at current levels? And if you could name a few stocks as well.
One can look at information technology, which I think will be a surprise package. We are likely seeing the very final leg of decline — from the current level of 9,000 odds. We are going to see 13,000 on the Nifty IT index over a period of nine-12 months. Within IT, focus on something like a Mphasis or a Tata Elxsi.
But once again: be sensible and allocation should be a staggered fashion. If your normal allocation is 100 percent, at the moment start with 10-15 percent and then go on increasing if the market starts to go up later.