Jaideep Goswami of HDFC Securities says that the government has not really done much in terms of divestment programmes over last 12 months. Nalco is a big player and Neyveli Lignite is relatively a midcap stock.
Excerpts from CNBC-TV18's exclusive interview with Jaideep Goswami:
What do you sense about the market now?
After a strong rally that we have seen for last few days, a time has come when market is again taking stock of the situation. Probably investors are in a mind to take some profit off the table. The market essentially is going to remain in a trading zone according to us. The results season coming up will obviously be an important trigger for the market's future directions.
What is the range you are expecting for the market at 10,300 or so? What is the value call on it?
We believe it could be within the band of 300-500 points. Obviously one has to see how the global events pan out, since they have a bearing in the way market sentiment develops. The market has more of less factored in the possibility of an interest rate hike in US now.
Local inflationary pressure is also building up to some extent in the wake of the fuel price hike. So we believe that there are pockets, which could outperform, going forward. For example, cement is one sector we are very comfortable with. I think a further price rise is expected in this. So performance wise, cement is obviously going to be an important sector.
How have you read the news of divestment today on Nalco and Neyveli Lignite, the public offers?
I would reckon that should be taken in the broader backdrop that the government has not really done much in terms of divestment programs over last 12 months. Nalco is a big player and Neyveli Lignite is relatively a midcap stock.
So sentiment wise though it is a positive development, I would not be particularly excited given the limited scope and nature by which the government is gingerly approaching this entire divestment program.
How do the banks appear to you? What are you telling your clients, if they have had a good day today?
On a rally in banks, we expect that some profit booking may come in again. Obviously investors are investing in these stocks when there was a significant correction at around 9000 levels, so obviously that profit booking is coming through. We are not prima-facie fundamentally very bullish on this sector going forward.
What are you doing with your holdings in sugar?
We are quite positive about sugar. We are of course looking at a scenario where we need to see the additional kicker of ethanol play on top of sugar, which is going to be the real trigger of sugar stocks. We need to see where the volume trigger sits on the price movement.
Right now, we are recommending Mawana Sugar and Bajaj Hindustan.
How would you read today's action? Can you put into perspective this entire run up we had from 8,800?
Coming on the backdrop of a period where one has seen severe volatility in the market, I think that level of confidence has come back and investors are more sanguine about the near term future as well as long-term
They are also looking forward to the buying opportunity although this rally has given opportunity for taking some profit of the table. Investors are on a much more sound wicket, which is what we need for continued performance of individual sector and stocks.
Considering the wild swings we had, do you expect it to remain at 300-500 point range?
According to us, a significant portion of leveraged trade, which was causing so much volatility, is out of the system. Investors are cherry-picking in sectors they like and as mentioned earlier sectors like cement, sugar, and some of the midcaps, have been shattered in the kind of leverage sell-off. Fundamentally sound sectors like infrastructure, where continued positive news is expected, are the sectors, which will give reasonable returns going forward.
If one buys on weakness and sells on a euphoric day, one can make good trading gains.
Any thoughts on this entire realty space, and whether you would bag some of them now?
Ansal Properties and Infrastructure, which has seen a kind of sell off, all the way down to Rs 330-340 levels, has rebounded well. The company has a good land bank and the project growth is going to come in a big way in earnings numbers in current financial year. So obviously this stock looks quite interesting.
But this real estate play has seen its own bout of volatility and a significant period of lower circuit, without much volume-taking place. So that remains a sort of systemic risk in this segment.
Another factor is the DLF issue, happening in conjecture. Regarding that, whatever valuation is to come, is going to have its role in this sector. My sense is that the companies, which are announcing follow on public offerings, will actually play an important role in the subsequent performance of these companies in the secondary market.
Do you suggest that any of these worth getting on to and riding for a bit more? Any of the real estate plays like Bombay Dyeing, Kalpataru Power Transmission or Peninsula Land?
As we have been repeatedly maintaining, our personal preference is build in essentially on players like Ansal Properties or Mahindra Gesco; rather than trying for a proxy player like Bombay Dyeing. Ansal Properties definitely looks good. Broadly we would be very positive in this sector from the long-term perspective but even on the short-term there is huge volatility. However, even at current price, we believe that Ansal Properties and Infrastructure offers good value.
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