Buy or cash those dips, don’t sell at these prices: Neeraj Dewan

“One needs to have a decent market for midcaps to fall and suppose we make a bottom this year, midcaps is one where we will get better returns and they can definitely be upward of 20-25%. But one cannot really bet a larger sum of money on midcaps because then the downside can also be huge in case markets are not supporting,” says Neeraj Dewan, Director, Quantum Securities.

The big debate since morning is whether or not it is time to short this market. Do you just stay on the sidelines or buy it already?
I am of the view that the market downside will be limited. We have seen the market testing around 15200 levels. That is the kind of level which I feel the market can test again if things go wrong globally and one gets some bad data. So around 15,000 is the level where I feel the market can come and consolidate and then move up. The downside being that limited, I would rather be a buyer on dips rather than selling at these prices. In this period of bottom formation, which from now, is on for another couple of months, one will get opportunities with the market being sideways and data still does not support it. One should cash those dips rather than selling now at these levels.

Why do you think the downside is limited? The war is still on, inflation has not come down. FIIs are still selling, crude is above $100. Why should the market go higher?
Central bankers are fighting with inflation and they also want growth at these levels so that inflation does not go up. I do not see any reason why crude should go really high from these levels. In fact, crude should start correcting.

Crude from China is also coming in at some discount and other countries are also improving the output. Plus demandhas been coming down and crude prices will start coming down. Crude has basically been the biggest culprit as far as inflation is concerned. That is one major call I have for the crude.

The second thing would be that our domestic market consumers, the commodity consumers are going to benefit because of the way steel has come down and industrial metals have come down, I feel margin is improving and there can be some pressure on some pockets which are the commodity which can still stay under pressure for some more time.

But the commodity consumers are the ones who should gain back and that is where I feel any downside in the market will be limited because there would be buying in sectors like automobile and private sector banks.

ITC is at Rs 291. You have been waiting and waiting and waiting and after you sold off the ITC shares, the stock went up. Is that the story?
No, that is not the case basically. As far as trading pieces are concerned I have been trading in it. I have been recommending to our clients to invest in ITC and actually paid off for the clients.

Where is the stock headed? Can it be Rs 400 in the next two years?
Over the next couple of years, ITC can definitely give a 15% kind of a return. I am not expecting ITC to give exceptional returns but it will definitely give the market performer returns, maybe 15% to 17% kind of return. That is what I am betting on is ITC. Concerns were not for aggressive portfolio but for someone who wants some defensive stocks also in the portfolio this can be part of that.

15% is modest according to you. What is your definition for aggressive?
Basically, we look at value in midcaps and that is where we feel that if we can identify the right midcap, the right management, then one can get better returns if the market is supportive. One needs to have a decent market for midcaps to fall and suppose we make a bottom this year, midcaps is one where we will get better returns and they can definitely be upward of 20-25%. But one cannot really bet a larger sum of money on midcaps because then the downside can also be huge in case markets are not supporting because midcaps are high beta stocks. So one has to be careful in making a portfolio.

What about some of these open up trades which have been doing rather well since the start of the year? Airlines, hotels, theatres everything?
I feel that trade is still on – whether it is hotels, restaurants, we are seeing a lot of high occupancy and a lot of travel happening. That trade is still on and I am very positive on hotels. That is one segment and even Cineplex and multiplexes we like because we feel that people have started going out and occupancy levels are going up. That trade will be on for at least a couple of quarters.