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Speaking to CNBC-TV18, Gul Teckchandani said that he is optimistic that the market is headed higher before going down. He added that most of the value is in second-rung stocks. They do not see the market going down on a continuous basis. Many small and midcap stocks look like multi-baggers, he stated.

Speaking to CNBC-TV18, Sushil Kedia, Head- Institutional Equities, K&A Securities said that the Fed remains under pressure to soften rates further. He added that markets have priced in a 25 bps rate hike by the Fed. Markets are hoping for a surprise from the Fed, stated Kedia. Nifty has key resistance around 6,000-6,050 levels, he observed. The Nifty can go up to 6,300 and then correct to 5,300.

Excerpts from CNBC-TV18’s exclusive interview with Gul Teckchandani and Sushil Kedia:

Q: What is your sense, going into the Fed meeting, do you see a case for the largecaps to actually catch up and breakout? Do you think it will be a range bound market?

Teckchandani: I would not know about the exact movement tomorrow. I am optimistic that this market is headed up before it is headed down.

Although, there can be an argument in terms of PE ratios, but the great value which still exist in the B-group, and I am talking about companies which are large size and several of them have growth rates between 30-70%, still seem to be quoting at about sub-10 PE ratios.

There is some work, which all of us have to do, to find these bets. But they are there and till they get exhausted, the market may have volatility. But it is not heading southwards on a continuous basis.

So, clearly one has to identify stocks, do a bottom up approach, marry businesses rather than prices and even in real estate, where a lot of people have been saying that valuations are moving up very sharply, one has been able to find bets which are sub- 10 and which look like multi-baggers even at the 20,000 level of index.

I am not at all overtly concerned about the Fed tomorrow. But if the Fed does give us that kicker which we need, then you will see the 20,000-22,000 range faster. But if it does not, we are still headed higher after may be a small correction.

Q: What is your sense in the near-term, risk reward is in favour of reward or risk from these levels?

Kedia: One day before the Fed announcement, which looks like it does not have an option of cutting at least by 25 basis points, it is the turn of the insurance biggies in the US and quite a bit in Europe as well, who are witnessing bleeding balance sheets and serious amount of equity financing may be required from these names, the pressure on the Fed to clearly soften further up is very much there.

In the currency market, the patterns that we can see as of now, euro is probably preparing to go back and retest its all-time high. This 10-day rally that we saw in the dollar index is perhaps going to find a small correction, going forward.

The long-term bearish consensus on dollar, perhaps needs to be challenged, the patterns are showing that. And the smart weakening in yen versus the dollar, that we saw in the last 7-8 days, is going to find a check. So, all of this adds together to a fact that markets have quite likely priced-in the 25 bps hike. Given the circumstances that prevail, whether the Fed would like to retain its ammunition and keep cutting in smaller pieces or it might surprise by a 50 bps cut, is what perhaps remains tomorrow.

Given this positive surprise potential left, I will not like to venture out and say that it is time to go and short-sell tomorrow. It will perhaps come at 6,300 on the Nifty, and if markets choose to on a 25 bps cut, start selling off in equities broadly, that might come tomorrow at the outermost at 6,050-6,060 areas.

So, on the upside 6,050 and 6,300 are two key fulcrums. Those who don’t like to trade contrarian; a trend confirmation on the downside perhaps will not come before 5,855 is broken down. Within the various sectors that you see inside the Nifty, a good signal might be existing on the CNX bank Nifty. A lot of banking stocks are perhaps going to produce a sell or a short-sell trigger for tomorrow.

So, with that one would like to just go into seeing what America does tomorrow, how Asian markets behave the day after tomorrow morning. In the short-term, even if there is a bullish furor bursting up from here, 6,300 looks to be a pretty tight place, from where a drawdown to 5,300 on Nifty should come.

So, summarizing, whether it is 6,050 or 6,500, perhaps for investment timeframe buyers, sometime within December or the first few days of January, the Nifty and the broad market should provide a potential to buy around 5,300.

Q: Textiles rallied a bit today. Do you see value in that space as a stock picker?

Teckchandani: I do see value in that. Basically, the whole theme that is coming out now is that the rupee may be here for some time at this level. It may even depreciate. If you look at the current account deficit, which till now has been USD 44 billion, it does not seem likely that the rupee can depreciate on its own fundamentals.

Because of the flows, which are technical in their very nature, the rupee can appreciate a bit here and there. But by and large my own view is that this is a time to look at the export sector, which has been beaten down and maybe even add sugar to that.

The world is looking at sugar stocks thinking that the production is going to be lower by 20-30% going forward. This, in itself, could be a rallying point for these stocks. My view is that tech and textiles both need to be looked into on a bottom up basis, wherever there is comfort and all of them have been priced from a PE perspective very reasonably now.

Q: Do you like anything when you look at the charts of sectors like textiles and sugar?

Kedia: I would agree with most of what Gul Teckchandani had to say here and add a perspective. This consensus about the one-way bullishness on the rupee might perhaps be good for the long run. But in the intermediate timeframe, it could be six-months to a year. Simultaneously, everybody seems to have got a clear idea that the dollar is going to fall one-way after this serious bearishness on the dollar. Both these themes are going to come under a very serious challenge. The first wastages of that have been seen in the dollar in the last 10-15 days. The dollar index has bounced off from 75 areas by almost 4-4.5%.

It is very likely that the dollar is going to rally by as much as over 20% in the next one-year. 15% is clearly feasible. Given this serious structural regime change in the currency interrelationships, most export houses in India are still pegging their commerce on the dollar. There is a very high chance that a lot of these sort of dog looking sectors - textiles, techs, pharma and sugar - might start attracting merit on an investment timeframe.

In terms of the immediate timing over the next two-four-weeks, textiles have sort off run-up. For very short-term traders, there might be sell signals coming tomorrow on those who are not averse at playing a 15-20% kind of move. On this pullback, there will be a many opportunities to be found and looked for in these stocks.

If at all technology comes back to the last bottom that we saw or maybe even a few percentage points lower, then most names are going to buildup to a much larger rally. In the last 15-20 days, have you seen a 15-20% move on most largecap names. If this pullback is going to retest maybe few percentage points lower, a move would imminently give us 30-40-45% kind of returns going forward in the next 3-6 months. This clearly has its origins in the idea that bets the dollar down. This is become a story which is too popular now.

Q: The other segment that has been rallying is oil and gas. What do you think is happening in that space? Even oil marketing companies have gone up, GAIL has done pretty well. Do you think they are playing catch-up after their big underperformance?

Teckchandani: You can call it catch-up if you like. The largest E&P company in India is ONGC and if you compare it with the largest private sector company, I think both are lending themselves to great comparisons. Yes, there is subsidy logic to ONGC and several of these other companies. But when you take an investment view on these, I don't think you can find a better place, but to invest a little bit of money, which you can say I will forget for some time. This could be over a period of one-and-a-half to two years, because nothing is going to happen between now and next year, which is effectively the election year. Soon after that I think we will have to take a call on whether these kind of pricing as we have in the oil sector will continue. The same thing applies to the tech sector. If anybody can manage a 13-14% appreciation in the rupee, manage to still have growth, retain clients, and most of them are now coming out with statements saying that the so-called sub-prime problem in the US is not going to impact them adversely.

The only sector which remains to kind a kind off catch-up is automobiles. If you genuinely believe that if the Fed cuts rates, then India is also in kind of situation where it would have to cut interest rates. I am not a believer of that line of logic, if at all this will be reviewed going forward next year. But assuming that you believe, at least the market will then take cognizance of automobiles, which have been languishing singularly for a long time.

Source: Moneycontrol.com