Jagdish Malkani, member of NSE believes there is still poison in the system. Therefore, though quality stocks have retreated 10-15-20 per cent from their recent highs, he recommends cherry picking.
Excerpts from CNBC - TV18's exclusive interview with Jagdish Malkani:
Do you expect this kind of range bound low volume trade?
If one divides the class of investors, I think the FIIs are still skittish, still nervous and their sales in the cash segment seem to have slowed down. But on the other hand, their F&O numbers are beginning to turn negative. So overall I still think there is an outward flow and the state of the rupee tells us that.
Our mutual funds continue to do a valiant job of investing their money. I think HNIs and retails are still badly battered and driven out of the market because of high margin calls etc. In most of the brokerage houses, their volumes have come down to trickles. I would say that there is still poison in the system.
What would you do with the frontline tech pack now; it's rallied on the back of rupee today?
Clearly, they do represent value, but some of them have run up. I would go individual stock picking. I think Satyam Computer Services is one with a lot of momentum, but probably needs to catch up. Rs 950 on the highs, now Rs 720. So it has retreated quite a bit in the correction that happened across the board.
But clearly, an attractive space, but I am not so bullish.
How have you read the numbers that the auto companies have come out with and which one would you pick up now?
I think it is an excellent set of numbers for Mahindra & Mahindra, but I must say a lot of this is in the price already. Overall, I am nervous in the market. Even though Hero Honda numbers look excellent, they are still facing quite a competition from Bajaj Auto in motorcycles.
Overall I am much more in a defensive mood. Therefore Punjab Tractors is a great buy and has a lot of ways to go up. One can see from the strength of the stock, it is barely 10% down from its recent high. So obviously, there are other believers in that theory.
What are you doing with your sugar holdings?
I think sugar will make a comeback. There is still too much action left on the alternative fuel, ethanol. The prices are still holding firm. It is just witnessing sector rotation and profit booking. Also, sugar was in weak hands across the board, where people were selling to pay those margins.
Nothing has changed in the fundamentals. Importing white sugar makes no sense, as it is not viable. Even conversion of raw sugar is good for southern sugar mills, which use up the ideal capacity. Sugar story is alive and well. It is just on the sidelines for a bit.
Are you finding more compelling buy ideas from the midcap universe now?
Very selectively. In this extremely skittish environment, I am of the view that there is more poison in the system to be sucked out. Quality stocks have retreated 10-15-20% from their recent highs. Very selective midcap stocks and I recommend cherry picking.
Any disclosures?
I have Punjab Tractors.
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