Web exclusive: Should you exit rate sensitive stocks?

The markets have given a thumbs-down to the RBI’s review of the Monetary Policy today. Should you sell interest rate sensitive stocks and switch to defensive bets? Check out what Hormuz Maloo, technical analyst, Geojit BNP Paribas Securities suggests in a chat with Puneet Wadhwa.

Smartinvestor : Hi, this is Puneet Wadhwa and we have Hormuz Maloo, technical analyst, Geojit BNP Paribas Securities back with us for a technical check on the markets post the RBI's review of the Monetary Policy

Smartinvestor: Good afternoon Hormuz and welcome back

Hormuz Maloo: Good afternoon Puneet, Glad to be here

Smartinvestor: The markets have plunged after the RBI kept the repo rate and the CRR unchanged, contrary to the expectation of a 25 bps cut. What are the key levels for the Nifty that you are keeping a tab on now?

Hormuz Maloo: Last week we were looking at certain long term resistances which were existing near the 200dma, which is currently around 5070 pts. Right now the Nifty is slightly above this level but I do not think that the resistances have been convincingly crossed on the upside. I think the Nifty is still testing these longer term resistances.

Smartinvestor: What is the strategy one should adopt for the rate sensitive stocks now, especially banking and auto counters?

Hormuz Maloo: Today is turning out to be a weak day. If the Nifty does not start showing strength again in the next couple of days, it could enter a medium term decline once more - in which case the rate sensitive stocks could lead the decline. Short term traders should book profits in cyclical stocks. In the longer term too, it is likely that most cyclicals will see lower prices, so most cyclicals unless it is a high-growth company like IndusInd Bank or Yes Bank is likely to see lower prices.

Smartinvestor: Do you think it is a good time to pick up defensive stocks given the uncertainity in the markets? Do you like anything in the healthcare and FMCG sectors from a near-to-medium term perspective?

Hormuz Maloo: FMGC and Healthcare stocks are known to be the best investments over a long term that extends over multiple bull and bear markets. So almost anytime is a good time to buy these stocks. Moreover, given the current weak outlook of the broad market, it is likely that that these companies will continue to outperform most stocks in the medium term - at least until a new bull market starts. Investors can look at stocks like Agro Tech Foods, Colgate, Glaxo, Glaxo SK Cons, ITC, Novartis, Nestle, HUL and Proctor & Gamble.

Smartinvestor: Thanks, Hormuz for your time and advice. Please give us your disclosures (if any)

 

Hormuz Maloo: No personal holdings in any of the stocks discussed. Thank you and see you again next week.