Spread investments over next 6 months: Vibhav Kapoor

Vibhav Kapoor of IL&FS sees a lot of pain for markets going forward. However, he adds most of the bad news has already been priced in by the markets and that the markets won’t test the October lows again. “We have been maintaining for some time that the 2,250 mark we saw on the Nifty in October is at least at intermediate low for the market and could even be a bear market low,” he said, adding: “This does not mean that we are going to go in for a big bull market immediately.”

“While the overall scenario is very negative in terms of news, we think the market has priced that in largely and therefore we are not as negative on the market as we were a few months ago."

According to him, the Nifty is now going to trade rangebound between 2,250 and 2,900 or 3,000. "This range could probably continue for a few months or may be even a bit longer than that."

Investors, he said, should not buy everything at present, but stagger ones' investments over the next six-months.

On the other hand, Sudarshan Sukhani of Technical Trends said it is fair to expect that the Nifty will go down to 2,200 and test the October lows. "Given the downside momentum that we are experiencing currently, the test may not even succeed, which means mentally one should all be ready to expect something below 2,200," Sukhani said.

Here is a verbatim transcript of CNBC-TV18’s exclusive interview with Vibhav Kapoor and Sudarshan Sukhani. Also watch the accompanying video.

Q: The market was prime for a bit of a bounce and it has got it. Where do you see the next days going though?

Kapoor: We have been maintaining for some time that the 2,250 mark we saw on the Nifty in October is at least at intermediate low for the market and could even be a bear market low and we continued to maintain that view. Of course, this does not mean that we are going to go in for a big bull market immediately but we think that a lot of the negatives, which are there in the fundamentals, in the [Indian] economy, in the global economy, have been mostly priced in into the market in this last big fall that we had.

There is going to be a lot of pain going forward — one will keep on hearing negative news fundamentally on the economic side, and probably a couple of quarters of bad results on the corporate side. But as I said, they have mostly been priced in. So essentially, the market is now going to be rangebound maybe between 2,250 — which we saw earlier — and probably something like 2,900 or 3,000 odd on the higher side. This range could probably continue for a fairly long time to come, which could be a few months or maybe even a bit longer than that. So while the overall scenario is very negative in terms of news, we think the market has priced that in largely and therefore we are not as negative on the market as we were a few months ago.

Q: It has been debilitating for global markets and now there are fears of what happens with some other financials like Citi for example. Will we remain very in tune with what happens with the global market picture in the near term?

Kapoor: I guess so because it has been generally proved now that there is no decoupling, which happens in the world, whether it is India or China. So we are going to be in tune with the global markets. But globally too, a lot of the bad news has been sort of priced in into the markets. So while one might see another 10% fall in the US markets and maybe in the other global markets as well that could make us retest the bottom of 2,250 going forward. So, one could see these panics happening sometime. But I don’t think that even if you look at the fundamentals, if you look at the other side where there are other positives happening — with interest rates, inflation and oil prices coming down — when one takes a look at all of that, I don’t think we are really going to much below 2,250 and at that level the market seems to look attractive. Again, it is not anybody’s case that one should be buying everything now and we should be looking to buy but looking to buy only on panic days and not on a day like today. That also spread out your investments over the next six-months.

Q: We got a bounceback as the market was expecting. But do you think we can do a little bit more with it?

Sukhani: Yes, why not. We had seven down days. That was also remarkable because in this bear market, we have had rallies after three and four days. This time, we had seven continuous days when the market simply fell.

So, the market apart from international cues was ready for a relief rally. And luckily we got one today. This can easily continue, it can continue on Monday. We can reach 2,900 on Tuesday. That is the level at which a significant resistance occurs.

So, that is a good 200 points and it is tradable, and traders can make money if the markets help.

Q: The medium-term trend however still remains intact, right – that October low that we will get to?

Sukhani: Yes, the medium-term trend is down. The primary trend, which is the long-term trend, is down. It is only the very short-term trend that appears to have changed today.

So, if the intermediate trend is down, there is no reason to assume that the markets will stop falling. Now the timing is different. The markets will fall when they want to. But it is fair to expect that we will go down to 2,200 and test the October lows.

Given the downside momentum that we are experiencing currently, the test may not even succeed, which means we should all be ready mentally to expect something below 2,200.

Q: What do you do with this whole real estate pack?

Kapoor: We should be completely avoiding this sector for the time being. This is one sector where probably a lot more negatives have to come in, in terms of fall in prices, delay in construction of projects. Most of the real estate companies are heavily overleveraged. So, they are going to have problems. Their balance sheets are not so strong in that sense.

So this is one sector that one should avoid not just for the time being but for quite some time to come. Even if one wants to buy into the market gradually, this would probably be one of the last sectors I would recommend.

Q: In the next few days, do you think it is likely we might get some fiscal impetus? There has been a lot of talk about setting up a special window or a fund for infrastructure projects?

Kapoor: I am reasonably sure that we will get a monetary policy change sooner or later, which is a reasonable cut in interest rates, and maybe some other measures too.

As far as fiscal is concerned, something like a special window for infrastructure projects is all fine. But the issue there is that these projects take a long time to get executed. There are so many hurdles and clearances that have to be got.

So, it is not only a question of availability of finance. The impact of such measures takes quite a long time to come. So even if something like that is done, I don’t think it will have any immediate impact.

Q: Is there a tradable bounce in some of those stocks though — Reliance Infra, GVK and IVRCL?

Sukhani: In most of these, there is a tradable bounce in spite of the 5-7% gains we have seen. The stocks had fallen so much that the relief rally could easily take them higher. So the entire infrastructure pack, the construction pack has some potential. We are talking about the very short-term swing trade, which is going to last till the middle of next week. So this is not to say that these stocks have suddenly become long-term investment-buying opportunities. That’s not the case. But yes, for traders, there is something probably here.

Q: One word on Reliance, which held out today?

Sukhani: Reliance and Nifty are going together. Beyond that Reliance is likely to under-perform. One of the problems with Reliance is that, unlike the Nifty — the Nifty has strong support at 1,800-2,000, so it is not very far — Reliance has no support whether it falls to Rs 900-800 or Rs 1,000. The next support comes somewhere around Rs 400-500. So for me, Reliance becomes a very tricky stock to buy and hold. One can trade in it but one might as well trade in the Nifty. That’s probably a better opportunity.

Source: Moneycontrol