Good time to enter the market in a selective manner: Arun Khurana, UTI AMC

ET Now: What’s your own view on the market? Do you think we are headed for a correction beyond 4700?

Arun Khurana: Remember I was here on air on the 3rd of November and I mentioned that market was looking ripe for a correction because over a month before that, the market was again down and the market perked up above by about 10% without any macroeconomic change. I had also said that the market is one-sided for above 4900 and should oscillate between a range of about 4758 to about 5490. One thing which I looked at, in fact I did some analysis and interestingly it was only about twice in the last one year that the markets did close below 4758, which was on 26th August at 4748 after touching an intraday low of about 4720 in terms of Nifty. Again on 5th October 2011, when it closed at 4751 after touching an intraday low of 4741.

Again on 26th September 2011, it touched an intraday low of about 4758, but bounced back to about 4835. So my sense is that at this point of time, there is not much room for worrying. My sense is it would be very difficult for the markets to go below 4700 levels and this could be a good time to enter into the markets in a selective manner.

Instead of waiting for about 4700 levels to be breached for one to begin buying, if you have Rs 100 right now, we should be putting about Rs 30-40 right now and then waiting for a correction beyond 4700 level if at all it happens. So this is a good time to enter the market in a selective manner across certain sectors which have been battered to a very large extent as against the fall of about 8-9% in the markets.

Arun Khurana: I am not so positive about capital goods at this point of time because the government spending is not taking off largely enough in view of the looming and increasing fiscal deficit. But banking, yes, to a very large extent, banking seems to be incorporating most of the negatives. Most of the NPLs have been done away with because the banks migrated to system of NPLs and by about September, almost 80-90% of the residual slippages have been done away with. Most of the large PSU banks are quoting at a discount to their one-year forward price to book and even price to adjusted book. So, my sense is the PSU pack in terms of banks, they appear to be poised pretty attractively. One should start looking at them with renewed confidence and should enter in a phased manner over the next couple of weeks, but capital goods, they should still take some time in terms of definite kind of signals coming up from the Government of India, in terms of how the government standing is going to take off over the next one year and in what manner.

ET Now: What about sectors where money could flow in due to the weak rupee? Does IT still look good? What would be your picks in the IT space?

Arun Khurana: Yeah, I guess so because the oil continues to be very strong. It is not going below $100 a barrel for the last six months or so. It keeps oscillating between those levels and given the fact that we have got an oil shock, which is going to take about $20 billion out of the system. The rupee should remain under a lot of pressure maybe in the next 6-9 months presuming oil does not crack below $100 a barrel. Even if you look at the cues coming from the RBI over the last week or so, they have also said that they are going to leave it to the market forces for the dollar to get stabilised and not intervene significantly enough. So IT should definitely prove to be a good pack to invest in over the next couple of quarters or till the time that oil starts showing some major signs of nervousness just in case the Brent crude were to go below $100 a barrel and remain there for quite sometime. So till such time we should really play IT aggressively in the coming days.

Arun Khurana: What my understanding is as of now, the position in Eurozone remains pretty much acute at this point of time. The good and the bad news keep on alternating, but nevertheless what my understanding is more than the problems emanating from the Eurozone, the bigger problem what we have is at the domestic and in terms of high crude prices, the depreciating rupee and the appreciating dollar and the fact that the IIP numbers are not showing any kind of promise in terms of growth. The inflation is definitely not coming under control. Liquidity also is getting diminished from the system.
As things stand today, we have about 127,000 crores of money sucked out from LAF through the RBI and on top of that we have another 53000 crores of money, which the government has borrowed from RBI under the Ways and Means facility. So we have a systematic liquidity crunch of about 180,000 crores and that is despite the fact that credit growth has not taken off. So, the domestic issues are getting played out in the markets more than the Eurozone issues. We will have to see how the Eurozone issues actually pan out. We also have to see and assess as and when the problem actually gets sorted out, but it is too premature to comment at this point of time that whether or not the Eurozone problem is going to play out on the Indian markets.