MUMBAI: Manish Sonthalia, vice president, equity strategy, Motilal Oswal Securities
, said the momentum is so strong that the markets will move significantly higher from the current level.

Is there room for some more rally in the markets?

Sonthalia: Yes…it looks like the momentum is so strong that the Sensex will easily breach the previous high close of 15,500….it may approach 16,500 quite fast…I expect the markets to move higher from the current level.

Around 15,000 on the Sensex, is it fairly valued or do you think it is starting to appear stretched?

Sonthalia: From the valuation perspective, given the earnings that we have for the current year, it is more than fairly valued…but there is no thesis to suggest that the markets cannot overshoot fair value…everybody is expecting growth in the second half of the year… so it is going to be back ended…the markets have a tactical way of moving first and then the earnings will follow… I think that’s the way the markets are going to play out… so you are going to remain overstretched for a short-term, say the next 3-4 months… after that, earnings are going to follow, and there may be positive surprises the way the earnings season has been panning out….we are actually seeing margin expansion…I think we still have a lot more way to go up…but not purely justified on the back of valuations.

What kind of Sensex or Nifty targets are you working with from the medium- to short-term?

Sonthalia: I think the Sensex, by March 2010, can definitely achieve a target of closer to 18,000…my targets are clearly between 17,000-18,000 on the Sensex by March 2010, and that’s the figure I’m working with….

Reliance around Rs 2,000-2,030…do you think that’s good for some more?

Sonthalia: Looks expensive at the current price…of course, it was propelled more by news flows that the government has intervened…now, the MoU between the two brothers itself is in question…so, obviously, RIL is the beneficiary because only after a certain period of time, there is an asset flow back to the government…at the current price, it’s slightly expensive but may be closer to Rs 1,550-1,600 or two times book would be the right price to buy Reliance.

What’s the call on RNRL?

Sonthalia: Well, we are not tracking it… the company does not have any earnings at the moment, and it is all on expectations…how things are going to pan out or whether they will be allowed to sell gas is the main question…

What do you make of NHPC’s plans to raise funds and the IPOs in September?

Sonthalia: I have not really studied the fundamentals of NHPC… the hard copy of the draft prospectus is still not out…it will go a long way in valuing similar companies in the power sector…the immediate examples that come to mind are Jaiprakash Associates and JP Hydro being the subsidiary….

Post the rally, are the valuations of IT companies looking fair or stretched?

Sonthalia: They are clearly on the higher side to the extent and the visibility of earnings for FY10-11 that remains muted. Until the demand environment improves, and that is seen in the bottom line, it is really like the market knows better than we do….

source: UTVI

Tags: hot stocks, nifty at 5000, sensex at 20000, sensex in 2010, which stocks to buy

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