Sandeepa Arora of India Infoline believes the markets are going to be rangebound for at least another couple of months. If the global cues are okay, then one can see some liquidity pressures ease off and when liquidity stabilizes, the market will move up, she explains.
Sandeepa Arora of India Infoline believes the markets are going to be rangebound for at least another couple of months. If the global cues are okay, then one can see some liquidity pressures ease off and when liquidity stabilizes, the market will move up, she explains.
She further advises, if one has a slightly long-term view to the market and if one is willing to hold on for a couple of years, then some of the midcap stocks are very attractive. "We would recommend to be very stock specific in the market," she adds.
Excerpts from CNBC - TV18's exclusive interview with Sandeepa Arora:
Are you surprised to find the markets at 10,400 because just couple of days back it looked quite weak, but we managed to not only hold that, but also bounce back?
Not really, I think we are typically in a range bound market. I think that the low end or the range would be closer to 9,500-9,800 and probably the upper band is closer to 11,000-11,500.
So we have maintained that range in the last couple of months by lending some stability. Now, we are not continuously falling. So in that sense, we are a lot more stable than we were sometime in May. Therefore, I think that the markets can improve from hereon at least for the short-term.
Banks have been the leading sector for the last couple of days. Do you think this bank rally is sustainable?
Not really, we have seen this bank rally on the back of the Credit Policy, but the fact of the matter is that the banking stocks have been battered down over the last couple of months. So some of the banks have started quoting again at reasonably attractive valuations.
So if you take a long-term view and the valuation that they are currently quoting at, obviously there was some kind of a need of a bounce back because they had been battered down tremendously.
So in that sense, we are seeing a short-term rally. As far as the question of sustainability is concerned, that is a little questionable at the moment. We will have to see further global cues, etc on the interest rate scenario, then we could probably take a call long-term.
We are done with the Credit Policy and will probably be done with the earnings by the end of this week. Where do you see the market moving from there?
As far as earnings are concerned, I think that most of them have been pretty much in line with expectations. So on the earnings front, we have at least not seen negative surprises or to my mind, that is in fact positive because a lot of people were very skeptical on the earnings going forward.
Having said that, we are in a slightly higher interest rate scenario. So we will actually have to wait and see how the Q2 earnings pan out. Whether these earnings are sustainable or not is a big question mark in most people's minds and that is something that we will see.
As far as the markets are concerned, we are going to be rangebound for at least another couple of months and then if the global cues are okay, we can see some liquidity pressures ease off. And when liquidity stabilizes, we will see the market moving up.
What do you expect to see in the midcaps in the next few months?
It will be a very stock specific movement because the way results are coming out, a lot of stocks, which are actually quoting at decent valuations today would look like attractive buys, given the fact that again a lot of stocks have now started quoting below 10 PE, etc.
So if you have a slightly long-term view to the market and if you are willing to hold on for a couple of years, then some of the stocks out there are very attractive. We would recommend being very stock specific in the market.
A quick word on the cement numbers. Ultratech has frozen in circuit now, but now you have seen most of the cement stocks, do you think they can justify higher levels?
There is a little bit of a mixed view out there. As far as valuations are concerned, they are fairly valued at these levels. I do not know how much upside is there in cement stocks.
However, we are seeing continuous growth, so we continue to be bullish on the construction sector as a whole and infrastructure. So cement would continue to be held on to. However, valuations are yet a little more expensive and we can probably say book profits. But it is not that many of the cement pack are cheap at the moment.
What do you do with some of these stand-alone refineries?
Our advice is to stay away. Essentially, the two sectors that we are looking at would be technology and infrastructure as we are seeing a fair amount of visibility in both of these sectors. So one may as well be in sectors that are showing visibility.
For instance, if one holds Infosys, one knows what is going to happen in the next year and the year after that. It is better to hold on to a stock, which is more visible than a sector, where we are not seeing much visibility. The two sectors that we are strongly recommending and are still bullish on are infrastructure and technology and will maintain that.
BEML has corrected quite a bit from Rs 1500-Rs 1600 all the way to Rs 800. How do the numbers sit up for you?
I have not really looked at it in detail, so I would not want to comment on them right away. But as far as the sector is concerned, we will still put a buy on Siemens and ABB, we have seen some strong set of numbers coming from both of them. Even construction to a certain extent.
We are looking at some of the midcaps stocks over there, for example BL Kashyap or Patel Engineering. These are some of the stocks that we continue to maintain a positive outlook on. These are the kind of stocks that we are continuing to recommend. One needs to take a slightly long-term view on all of these calls that we have made.
Anything from the midcaps technology that caught your eye?
The results that particularly caught our eye were Infotech Enterprise. We saw some very solid numbers coming in from them despite salary hike. They have maintained their margins, that is an EPS of Rs 52-Rs 53 annualized. That looks fairly attractively valued closer to 10 PE. That is a stock that will show 25-30% growth in the coming year and that is a stock one should buy at these levels.
Any disclosures?
I do not hold any of the stocks.The Monetary and Credit Policy 2006-2007
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