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    It is better for market to consolidate in H2 or there could be a big correction later: Neeraj Dewan

    Synopsis

    “In the second half, there is a case for a consolidation because we are talking about wider participation in the market. Some sort of euphoria is building in and so some consolidation is likely to happen around these levels. That is my expectation because if that does not happen, then it becomes vulnerable to a bigger correction later. ”

    Where can you add new positions in a booming market? Neeraj Dewan explainsETMarkets.com
    "More than auto, auto ancillaries is one space where one would still find stocks which are attractive valuation-wise and one can get decent returns because commercial vehicles sales have also picked up. Tractors have been soft but somewhere down the line, they will also start contributing," says Neeraj Dewan, Director, Quantum Securities.

    How are you enjoying the party?
    It has been pretty decent because no one had expected that the market would come up this way. At 15,100, 15,200 everyone was talking about investing at 14,000 and now we are back to 18,000. It has been a really good party on the streets and we have seen a lot wider participation also, even midcaps have rallied and it has been more or less on the lines of what people were expecting. Auto ancillaries and financials should do well. All of them have done well in the last one month, one-and-a-half months.

    We were down 15%, we are up 15%. Second half up, down, sideways?
    It should be more of a consolidation for some time because we are talking about wider participation in the market, Some sort of euphoria is building in. So some consolidation is likely to happen around these levels. That is my expectation because if that does not happen, then it becomes vulnerable to a bigger correction later.

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    If the market takes a pause and has some consolidation around these levels and if with the measures the central bankers have taken, inflation keeps coming down, then again somewhere down the line in a couple of months they will be concerned about growth. We can have a good background for another rally for the market.

    Ideally the market should take a pause around these levels or consolidate though I am not looking at a big correction coming in because we know what market reacted to earlier and there is definitely some correction happening which is helping India like some correction in crude prices. Keeping all that in mind, I am not looking at a big correction coming in the market but definitely some pause and a small correction is possible around these levels.

    Just based on the kind of key takeaways that the company has given, Avenue Supermarts is talking about how they have opened the highest ever 50 stores in a year through March and they have been saying that sky’s the limit for brick and mortar retail in the country.
    The way they have built up the franchise, we see they started and store by store they got profitable and then expanded. Their model is such, they do not really expand without thinking about profits. I think that augurs very well for the kind of models they have but the only issue right now would be valuation. New 50 stores will start contributing. It will take some time for them to match the profit that the other stores are making but then valuation is something which right now is not on the right side for Avenue Supermarts kind of a stock.

    I would rather not look at investing but if someone is already invested, you should hold on to this stock.

    It is a similar case In Tata Elxsi also, the valuations are very high. These stocks can stay overvalued and can give you some return but to get exceptional returns, you need to enter a stock at a decent valuation which right now is not there in Avenue Supermarts.

    There’s a fair amount of excitement and the stock prices are reflecting that within the entire motown space. After the recent run-up and being a well discovered story, would you still buy afresh or add to your existing positions within autos?
    Right now, I am adding positions in auto ancillaries because though I like Mahindra & Mahindra, it has moved up a lot. I still like that story and the kind of launches that they have ahead of them. It augurs really well for the future growth. That stock still looks decent if one has invested, and can enter on dips dips but one cannot look at exceptional gains from these levels.

    However, auto ancillaries is one space where one would still find stocks which are attractive valuation-wise and one can get decent returns because commercial vehicles sales have also picked up. Tractors have been soft but somewhere down the line, they will also start contributing. So auto ancillary would be one space where I will put my bet on.

    Finally we are seeing a turn in Zee. Do you think the Zee stock is simply catching up?
    Yes, nothing has come up as such. Results were okay and as far as the merger is concerned, we are still waiting. It looks like Zee and Sony have forgotten about the merger and we are all still waiting for it and that is something which is taking a lot of time.

    It has tested the patience of its investors. If one still has a view of one and a half-two years, definitely one needs to hold on to the stock and even buy on dips. I am also invested and holding on to Zee and I feel that once the merger happens, you will get an entry into Sony-Zee which is very attractive. One needs to hold on to Zee if you are already invested.

    As far as the current move is concerned, it would be more or less a catch up but till we get any further news on how the merger is progressing and some timeline regarding that, one cannot really take a bet on when the merger will happen and then the next move will only happen. If the kind of breakout we are expecting, it should close above Rs 280 and that will happen once we get some more clarity on the timeline.

    What about the capital goods space? We are seeing potential reports talking about that rerating potential for L&T, a late cycle candidate, order momentum and execution being the key determinants for the company’s growth going forward.
    Even after seeing good moves in stocks like Siemens, ABB, L&T definitely has not given that kind of return though the order book is pretty good. Going ahead, L&T can be one stock which really gives you decent returns because the kind of commodity correction we have seen will also help L&T. Besides L&T, even in the broader market, there will be companies which are doing works for railways like Rites, which have a good order book or there will be transmission companies which have decent order books.

    Across capital goods engineering space, infrastructure space there are definitely stocks which at the current price one can look at and L&T in that category, can give decent returns though the broader market the midcap stock have a potential of giving better returns.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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