Member of NSE, Jagdish Malkani believes Thursday's bounce back or rally, will be slightly longer and will bring back some confidence in the markets. "I think 9500-9800 or even 10,000 probably is a fair value for this market right now," he says.
Malkani also believes if the rally comes, the top 20 -30 midcap stocks would be sold off. "The midcaps are really battered and bruised and I think they are going to take a while to come back," he says.
Malkani discusses various sectors and gives his picks from the long-term and short-term perspective.
Excerpts from CNBC - TV18's exclusive interview with Jagdish Malkani:
Do you see these market movements as a bounce back? How much more would you give it?
I was expecting something like a 1000-point rally and I would stand by that. May be we will see a little flutter. Somehow, I think this rally will be slightly longer and will bring back some confidence.
I think people have been badly hurt, so it would take a strong person to say that this is a rebound. I think 9500 - 9800 or even 10,000 probably is a fair value for this market right now.
Putting the global jitters, emerging market shake-ups, US interest rates, etc. into perspective, I think this 30% fall of Sensex and Nifty was overdone. Certainly, I think some more bounce back is on the cards.
Is most of the domestic selling pressure over?
People are still trying to make sense of it. Besides the obvious figures of mutual fund redemption pressures, what is not captured are the PMS sales, some of the compulsory sales by banks, may be UTI Special Unit 64 that was sold, all that which has done a lot of damage.
In the last few sessions, FIIs have been net buyers and today, I think there will be healthy numbers. But I think the mood is going to stay choppy and very volatile as the entire world stock market situation. We are just part of the global action.
Where is the buying coming from?
It looks like from the standard FIIs.
Do you think midcaps are going to be stock specific and a lot of the bounces will be sold off?
If the rally comes, I think it will be the big stocks, the top 20 -30 stocks. The midcaps are really battered and bruised and I think they are going to take a while to come back.
I think it all depends on your perspective and one could take a contrarian call. For the longer-term players, one could be totally focusing on the midcap stocks, which have been beaten so badly. But some of them represent excellent value and those will really pay off.
The downside to that is that we are in a huge bear market across the world and those stocks will affect one's demat statement for a long time and knock off one's confidence as opposed to the leaders. So it is a different take that one can take.
Any thoughts on Titan and Suzlon Energy? Would you buy them now?
Titan came out with very good results, it was growing very well and it is in strong hands. But in this market, I would prefer other plays that have fallen more.
For Suzlon, I do not understand the business too well and I have always found it very highly priced. So I would look at some other good midcap stories.
On the F&O side, some of these big midcap stocks like Century Textiles, India Cements, Indiabulls have all bounced back about 15%. Where do you think these stocks are headed?
As a sector, I am very bullish on cement in spite of what happened with the government. One can see even in the monsoon, prices are on a rise.
India Cements could be a huge beneficiary. The numbers that came out were not bad, the debt has been paid. The South did not get the price increases of the North and the West. Therefore in many ways, it is a negative plus that if those prices come off, then the South does not have much restructuring to do for FCCB placement, etc. Probably it has fallen 50% from its highs and even more than its peers. There is more upside there. The cement pack today is among the leaders.
Century is again a huge cement cum realty cum retail cum everything business. It tends to be a speculative counter, so it could make a strong comeback. Though as far as cement goes, I would rather go for some of the more pure plays like Ultratech, etc.
I would not like to comment on Indiabulls.
Do you think there is much more of a bounce left in Deccan Aviation at Rs 90?
I found the IPO rather highly priced, considering that one can see on what is happening to Jet and its peers in this whole aviation space. There are better sectors to chase.
Will it be the same set of sectors that will take us up, capital goods and autos?
Not really. In autos, one is beginning to get a bit worried; input cost, margin pressures etc. Bajaj Hindustan, Tata Motors and Mahindras are great stories so far. In the auto pack, my number one pick would be Punjab Tractors because of the good space. Also, there has been a lot of institutional selling. I expect that to move.
The sectors that I would expect to bounce after the cement sector would probably be sugar and infrastructure. Even in realty, I feel that the fall has been overdone.
In oil also, the fall has been very severe. But today, IOC is up 15% and all those stocks have bounced. Would you give them a bit more?
IOC had hardly participated in the bull market and has been rather unfairly treated by the government subsidies. IOC's 80% is owned by the government, 9% by ONGC and hardly 2-3% out with the public. It is Rs 12.5 dividend in this price. That would be my long-term pick.
It was at Rs 580 about a month ago. It is not that it is incapable of going up even with all this oil subsidy issue etc. So I like that stock for the long term, it is not a trading stock.
You spoke about a few stocks like IOC, India Cements, Century Textiles. Do you have any positions to disclose?
I have all of them.
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