Significant upside in Nifty beyond 5000-5100 levels unlikely: Hemang Jani, Sharekhan

ET Now: Are L&T and BHEL from a value or price-to-book perspective looking interesting to you right now?

Hemang Jani: We feel that L&T is relatively better positioned vis-à-vis BHEL. Though we liked the operating performance of BHEL for this quarter, but the slowdown in order flow is quite a concern. Also, the company depends on the power sector and the government is not in a position to do much in terms of reforms or kickstarting the investment cycle.

L&T has a much diversified portfolio and has a good exposure to exports. So, the rupee weakening has some kind of a benefit for L&T. In terms of valuations, we find that L&T looks much better. So, for a quick upside of about 5% to 10%, L&T could be looked at.

ET Now: Do you track Adani Power, Adani Enterprises or Adani Port? Have you looked at the kind of valuations they may be trading at and do you like any of the group companies?

Hemang Jani: We do not have any of these stocks under our coverage. But we believe that the fall in the stock prices has some relation with some corporate governance issues, particularly with respect to coal mining in Bangalore. But, subsequently, the company has denied it.

Also, there are concerns that the absolute debt level at which some of the companies, particularly Adani Enterprise, is operating is pretty high at about Rs 4000 to 4500 crore. In an environment where the interest rates are not likely to fall, there might be some issues.

Also, they had slowed down their trading desk of coal because of wild fluctuations in the currency. Due to these concerns, there has been some selling by institutional investors. But we believe that at current levels it might provide some trading opportunity of about 10% to 15%.

ET Now: What you would be advising your clients to do? Markets are neither here nor there, because the expectations of a fall are as high as an expectation of a rise. Do you think it is a good time to start portfolio building?

Hemang Jani: The current sentiment is so weak that it would not make much sense to buy or accumulate stocks.

We are going to see an increase in volatility over the next two to three weeks as global uncertainties continue. So, it makes sense to buy this volatility by buying some call options and put options for next month.

We are recommending clients to buy a 4900 call of next month and 4700 put. So, buying into a straddle would make a lot of sense, because if there is volatility on either side, you stand to benefit.