What would be the next trigger for Reliance?

Every fall in the price would invite fresh money into this stock and a sharper correction would be a better opportunity to add from the trading perspective, says Deven R Choksey, MD, KR Choksey Investment Managers


Reliance yesterday hit a sub Rs 1,900 low. Would you wait for that level again to buy into Reliance or is Reliance is good at this level also?
The next trigger for Reliance stays with the O2C (oil to chemicals) company where the Aramco deal is expected to materialise. Fortunately, crude oil prices are showing a steady trend in the $48-54 range. The Aramco deal probably got shifted to the later quarters but it is likely to materialise. That is one positive news which is likely to materialise sometime in the January-March quarter. Whether you will get a sub Rs 1,900 price or not, I do not know, the company looks fundamentally sound from the traders’ perspective.

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Every fall in the price would invite fresh money into this stock and a sharper correction would be a better opportunity to add from the trading perspective.

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Do you think one should hold on to 5-10% cash till the Budget?
There is no particular theory. We suggest 5-10% cash but I can explain how we look at it. In our PMS, if we see the valuations on the higher side, then we feel the profit is justified to be booked in. Then we probably may go as high as 30%. Some of our PMS schemes would suggest that we cashed up to 30%. We could possibly sit in that. Recently, in some cases, we felt the valuations have peaked and earnings are not catching up as fast. So we ended up booking some profits and sat on cash.

I would like to say there is no general theory but yes, on a stock specific basis, in the portfolio we would probably decide how much cash we should hold. We are not saying that we would like to get out of the companies which we have invested in on the basis of fundamentals and which are of sound quality. We take the cash out and would probably re-enter during the fall and that is a strategy which we are playing for the past few months and that is working well for the profits of the portfolios.

On Monday, domestic institutional investors were not sellers. FIIs did not buy and that is why the stocks went down. Were DIIs the net buyers?
They ended up buying on Monday but that is the net buying position. All these days, on the DII side, they have been selling and booking profits. On the other side, a typical trend that we have observed and which will be subject to confirmation, is that the retail investors have been booking profits in the mutual fund units and they have been dealing directly and that is where in the last couple of months, the DIIs saw redemption. At the same time, they have been booking profits.

Generally, the FIIs are coming in through the trading portfolio. They would probably swing the portfolio on a rotation basis. Now with the current correction, we will have to wait and see whether they would be buying across the board or they would be buying into some pockets. My take would be that they would be buying into some pockets where the valuations will turn attractive with the fall in prices and they will trade by operating trading portfolio.

The DIIs are basically the AMC funds who would buy the opportunity to get into some of the select stocks and a 10-20% correction in good quality stocks would probably force them into the buying mode. It will probably be both. The trader as well as investors would individually decide the operations in the market on a counter basis and not across the market.