One should always keep a watch on a) bond yield, b) market cap-to-GDP ratio, and c) corporate earnings trajectory as these parameters decide on where the market will be headed next, Vinit Bolinjkar, Head of Research, Ventura Securities Ltd, said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts:

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Q) The D-Street recovered from lows on Monday after falling by about 1% for the week ended October 22. What is your call on the markets?

A) We had always been advocating to stay cautious given lofty valuations. We believe that given above-average valuations, a high earning base from hereon would mean that it would now be difficult for companies to post the growth, especially given high commodity prices.

Q) The next big question which investors would have is – have we hit a top? If not, any signs which investors should watch out for?

A) Nobody knows the top. However, one should always keep a watch on a) bond yield, b) market cap-to-GDP ratio, and c) corporate earnings trajectory as these parameters decide on where the market will be headed next.

Q) The momentum on the D-Street slows down ahead of Diwali. Do you think the bulls could bounce back and take the market to record highs? Key levels to watch out for on the Nifty and the Nifty Bank? *

A) The key levels for the Bank Nifty would be the sustenance of the 39,000- 39,500 mark, and for the Nifty, it would be important to sustain 17,800. Below 17,800, we believe that the panic selling would kick in, which can accelerate the market fall.    

Q) Sectorally, banking and financial service managed to outperform. What led to the price action – is it because of commentary from Moody’s and privatization hopes? The Nifty Realty takes a hit after a strong rally seen in previous weeks.

A) The banking space was expected to perform, given that many big banks had not participated in a big way in the rally that has been seen.

Apart from that, investors are of the view that private capex is finally expected to pick up, and hence the credit growth should be seen.

Improving the economy should also lead to recoveries and write back of the provisions done earlier. Besides, the overhang of the 3rd wave has now vanished.

For realty, we are of the believers that the cycle has just started, and the fall was mainly due to the steep rise in prices of some of the stocks.

Q) How can investors limit the downside? We know that VIX has gone up, and there is a possibility of further consolidation. Should investors focus on avoiding leverage, maintaining stop loss, etc. What are the other measures?

A) One should not resort to excess leverage and should keep strict stop loss. Further, one should follow a bottom-up approach in the small and mid-cap names and should stay away from fancy names.

In case someone is not too active in the market, he can resort to SIPs in mutual funds or stocks, which can help to ride the market volatility.

Q) Your top 3-5 trading ideas for the expiry week with a holding period of 3-4 weeks?

A) Burger King, Renuka Sugar, Tejas network, Hindustan Zinc, Canara Bank, Indiabulls Real Estate are some of the stocks, which investors can look at.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)