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Amit Dalal of Amit Nalin Securities feels that this market will definitely try to test new lows. Speaking to CNBC-TV18, Dalal said that the bears are out with their full strength. Dalal does not see any pre-Budget rally.

Excerpts from CNBC-TV18’s exclusive interview with Amil Dalal:

Q: What do you expect to see this market doing over the next few days and weeks?

A: The market is definitely trying to test new lows; it’s a market which is breaking down weak companies, results of which were not up to the mark. So a stock like VSNL which was doing well in the bull rally but did not give us numbers, is being broken down right now.

The real estate sector which perhaps had gone overvalued, is another sector which is being used by the bears to short and give them returns. So I think the bears are out with full strength and that’s exactly what the market is bearing with, right now.

Q: Do you think there is a hope that we will have a pre-Budget rally or is the screen telling you something else now?

A: The screen is obviously telling us that there will not be any rally. But the most important thing is that we have to see a change in flows.

If the flows do not come, whether there is a Budget or not, it won’t matter. Technically the market is better poised to that extent and the leveraging is almost insignificant now. We have a very low carryover of futures position from last settlement to this settlement; valuations of the Index are almost 25% cheaper than they were before. So we do have a case to make for the market. But it’s irrelevant if one doesn’t have FII flows.

Q: You spoke about VSNL – is the market very disappointed with Punj Lloyd’s numbers as well. That stock becomes a big underperformer?

A: Yes. if one takes out an exceptional credit which they receive on a sequential basis, they had lower profit and it's one of the stocks like Larsen & Toubro that one expects to perform better every quarter and to give growth and and a high PE ratio. This did not come through. But they had some explanation that some of the orders that they did in that quarter were not as profitable. We have to see this quarter what they do. But you are right that the quarterly numbers were something that has hurt Punj Lloyd’s present share price.

Q: What is the market talking about now for Reliance Power on Monday?

A: Everybody is concerned because we hope that the premium remains and some people are hoping to be able to sell off at the right price. I have not applied. So I do not have any interest in making any comment on this stock. But I would not be surprised if the premium is lost by the middle of the day.

Q: Would you buy any of the two IPOs, which are open now, Emaar and Wockhardt Hospitals?

A: No, I am not a big fan of the real estate development space. I think that we are heading towards extra-supply, we are heading towards land banks acquired at very high cost and definitely construction companies will do well. But I am not sure that people who are in development space will be able to give us the returns which we have seen from them in the past.

Q: What is your sense about the liquidity situation over the next three weeks because there was an expectation; we have seen that in the numbers over the last two sessions where FIIs did put in about USD 1.2 billion in the cash market. Do you see that equation reversing itself?

A: I think the RPL allotment was also in that number which you have just mentioned. I think as it gets cheaper, the case for putting in money into a market improves and also all the sectors where the earnings growth is there, whether it is technology or construction, all these have P/E ratios, which are much lower than what they were. Whether the flows will come or not is doubtful. The results in September, October and December were no different from each other. But the flows were huge. We have got almost Rs 18,000 crore in one month and from November 1 till now, we have got minus Rs 30,000-40,000 crore of flows. How that reverses itself is a global phenomenon, which is difficult to predict.

Disclosure: It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.

Source: Moneycontrol.com