Mkt to see choppy, volatile session: Amit Nalin Sec

Q: What is your sense, are we still on very shaky ground or do you see any optimism around as we head towards the end of the year?

A: I think we are going to be very volatile and that volatility was very spelt out in a Dow movement yesterday; it was allover the place, it went up and down 140 points and it closed up.

I think mainly this is happening because of the failure of the United States (US) to show any leadership in moving towards a solution or taking action which perhaps could move towards a solution to their problems.

Both in a G-20 meeting which was a complete lame duck affair and even what Henry Paulson has been talking about has completely made their markets adrift and with that the global markets are also now becoming extremely nervous with any rally that is coming on the upside.

On the technical side, I think everybody wants to stay away and see what is going to happen if we touch the lows which we saw in October in all global markets including India. If that happens, it is going to cause more nervousness and I believe that it will happen because of certain negative news that we haven’t seen till now and it will perhaps come to us as a shock. But while this is on, the markets are going to be very choppy and volatile.

Q: Give us a quick word on the import duties which the government is putting on steel. Do you think it will come as any durable relief to the metal stocks or you would still stay away?

A: I think it was a disappointment, they wanted 15% and market was looking at 10%; 5% is neither here nor there.

Q: What do you do with the power sector that’s the one which opened up a lot of cracks yesterday whether it’s an NTPC, Suzlon Energy, Power Grid or Tata Power all of them?

A: All of them for utilities are still expensive and they were the holder of the fort for long time and there is no reason for them to remain on 14-15 times forward discounting. I am not talking about Suzlon but Tata Power or NTPC. So it’s quite easy for one to say that they should correct down to perhaps valuations which makes more sense relative to the rest of the market. I think they remain safe businesses to remain in so people remain invested in them. But in terms of valuation there can be a correction because the rest of the market has corrected so much on valuation with the fear of the change in the business scenario that perhaps these were the last to correct and that’s why they are correcting.  

Q: Rs 1,100 give or take a few rupees for Reliance, would you buy it at that price?

A: We all know that right now there is a major slowdown in petrochemicals and of course the gross refining margins (GRMs) have just crashed and the whole story in Reliance was for 2009-2010 because of the gas and the RPL (Reliance Petroleum Ltd) consolidation which should have come into its book. RPL consolidation also will suffer because of a major fall in GRMs.

So given the fact that we are in a weak market and this is of course one of the heavyweights of the Nifty, it is difficult to say that one should buy it now. I would wait at least for another quarter and see how the business scenario changes before which one would look at Reliance. Also the gas thing has been postponed for almost three-four months.

Q: Import levy or not, would you look to play a contra trade on metals now?

A: It is a crisis valuation. You are getting stuff at bargain prices so if you were to take a call on any of them on a long-term basis, three-five years down the road then perhaps these are entry points and you might have to bear 25-30% fall from here during the course of the next two-three months or maybe next six months.

But it is not something that you trade with, you definitely have to buy now for the long-term because you have to expect the global economies to participate on a positive move upwards, China to go into its full-fledged development programme and a changing scenario, you cannot expect to make money on the current scenario.

So it is just a matter of someone saying that I want to take a long-term call on these stocks.

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