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Amit Dalal of Amit Nalin Securities says he was completely caught unawares by the upmove in the market. He did not expect it because the market was dicounting very serious issues ranging from Collateralized Debt Obligation outstanding of ICICI Bank to forex position .

He strongly feels that technically, this market has no risk left for the buyer except the volatility risk. "At 21,000, it was a riskier market to buy than it is today, he says."

He likes L&T and Punj Lloyed in the engineering space. He also likes the cement space, but advises caution due to the impending over-capacity situation at the end of the year.

Excerpts from CNBC-TV18's eclusive interview with Amit Dalal

Q: What did you make of trade today and for the entire week and the kind of data that we have been seeing in India?

A: Where the market today is concerned, I think I almost feel like an alien who has landed in some new country or something. To see an up market like this is something, which is completely foreign to our minds, so I hope it continues. In terms of fundamentals, I think we have been on the receiving end of some very bad news. Corporate India’s news have been completely shaking. The ICICI Bank outstanding Collateralized Debt Obligation (CDO) position, the forex positions and the mark-to-market losses--all were very serious matters which the market had to discount.

Q: Nothing really seems to be suggesting that one can go with previous earnings estimates. If that is really a shift in the fundamentals as you see in the space, how are you approaching this rally? Do you expect it to hold? Would you use every rally to get off, to lighten?

A: It is very difficult to say that because a) I am not someone who has to look for that opportunity on a day-to-day basis and b) I think it’s a very oversold market. Technically, this market has no risk left for the buyer except the volatility risk. At 21,000, it was a riskier market to buy than it is today. So given that, a rally of a 200-300 points is not really an opportunity to sell-- but for day traders, week traders.

Q: When you look at so many negatives and when you look at probably a certainty of earnings being tailored to the new realities, would you say that even in terms of value it makes sense to wait to buy or do you think that value would have emerged now?

A: I would be stock specific over there. Value has definitely emerged in cement industry and all stocks are at 9-10 PE, but the fact remains that one remains concerned with the increased capacity that’s going to come up in cement towards the end of the year.

Engineering stocks are still quoting at 23-24 times forward PE, but from whatever we have heard, the Index of Industrial Production (IIP) numbers are not a reflection of the business models followed by Larsen & Toubro (L&T) or even Punj Lloyd. I think the earnings growth will come there. I would not wait much more to buy; I think buying should start now.

Q: You talked about this market being less risky at current levels. What is leading to this sense of risk aversion at this point in time? Would you attribute more to the global factors or now is concern shifting more towards local reasons?

A: I think fear is a far bigger emotion than greed and we have been completely pushed towards fear; fear of the global scenario, fear of the domestic markets slowing down. Fear is something that keeps people away. For that to change we need equity leadership coming in and that usually has come to us from foreign buying. If foreign buying were to stay for a consistent amount of time, a week or ten days, I think the retail market would come back but without that I think we are going to continue to see volatility.

Q: You think Q4 and FY08 earnings would be an important key to that?

A: Any factor, which we have not assessed, for instance this mark-to-market factor, will change the very manner in which we see the earnings of a company. That’s going to be the most relevant thing I would like to look for in this Q4’08. Because just like you have a mark-to-market loss, something is going to have a mark-to-market profit for what has happened on the OTC market (Over-The-Counter). And mind you, at the OTC market, they don’t pay or receive in mark-to-market and therefore that can change every quarter. Any big delta coming from such an extraneous source of income or expenditure will be a very deciding point in how you look at a stock.

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

Source: Moneycontrol.com