Metal sector will see medium-term correction, says market expert Jai Bala

Sensex and Nifty ended over half a percent lower on Friday and marginally lower for the week. The market snapped its two-week gaining streak amid concerns, which were largely global in nature.

In an interview with CNBC-TV18, Nilesh Shah, managing director of Kotak Mahindra Asset Management, said that he expects industrials and home improvement segments to outperform in the coming quarters.

"As of today, we have been generally bullish on industrials in expectation of investment spending. While infrastructure and government spending are visible, we believe led by cement, steel and sugar sector, even private sector capex should be revived over the next couple of quarters. We have also been bullish on home improvement segment.

"We believe in the residential market and in the home improvement market there will be good volume demand for tiles, paints, electrical appliances, cables, wires, so on and so forth. These are the two sectors where we can see clear outperformance over the coming quarters."

He said metal being a commodity is bound to see some correction and a downward trend. He remains underweight on the sector.

"We believe metal being a commodity, prices cannot continue to rise forever. There will be a correction and a downward trend. Within metals space, we still believe copper, aluminium, steel, that is the pecking order in terms of attractiveness. So subject to companies, which are pairing down their debt or companies where spare capacity, additional capacity is coming on stream in near future, we have been generally underweight metals sector."

Jai Bala, CMT at Cashthechaos.com, said if Nifty manages to stay above 16,160, another record high for the markets cannot be ruled out.

"If you look at the Nifty, the markets have one more leg for it to go up and complete the sequence. The form looks incomplete to me at the moment but as long as the index is managing to stay above 16,160, I think there is one more record high pending for the broader index. However broader markets are already looking toppish."

He expects metal sector to undergo medium-term correction.

"I am looking at metals undergoing a medium-term correction. I think the top is in and 5,300-5,350 was an important level for Nifty metals, it has come to that level and is showing charts of medium-term correction."

Bala advised retail investors to move to 100 percent cash. However, he expects FMCG, IT, HDFC and Reliance to lead the final leg of the rally in markets.

"The strategy to adopt right now is, you should be raising cash beyond 50 percent of your maximum capacity. Retail investors can go to 100 percent cash. You can be positioned only on IT index or the FMCG index if you still want to play the last leg of the market. So, the last leg which I am anticipating for the market is going to be coming from FMCG names, IT index and if the weight is not enough probably from HDFC Limited or Reliance."