Investment Advisor, PN Vijay advises investors to hold on to stocks, which are performing well.
He says that though gains have been small, something like 2-2.5 per cent, a lot of consolidation has taken place in the past couple of weeks.
He sees less speculation in the market and adds that with the market at these levels, it is not yet time to take money off the table.
Excerpts from CNBC-TV18's exclusive interview with P N Vijay:
What would you do now, take any cash off the table or play for the new high and not book any profits right now?
If I have logged on to good stocks, then probably I will sit on them for sometime and hope that we reach new highs sometime during this month or early next month. If you have seen the behaviour of the market, for the last 6 weeks we had straight gains. But interestingly, the gains have been little, 2-2.5 per cent.
The market has gone up 12-13 per cent, which shows that there is a lot of consolidation going on in the market as it goes up; also, the level of speculative activity is a lot less. So my sense is that this is not yet the time to take money off the table, unless one sees a runaway rally.
Another positive is oil prices falling. Oil has lost more than 10 per cent in the last 10 days and that is a very good sign for India in terms of inflation and interest rates.
Have you been buying United Western Bank?
Yes in all honesty, and this you can take as a disclosure. I think I have dealt with United Western in the past; it's not a bad bank. It's not some bank, which you sort of write off.
They do have NPA problems, but on the other hand they have branch network. They are in a good part of India- the growing part- Pune and Western India. They have real estate, as some of your analysts have been pointing out.
I think, of course this is only for punters, I would say that this fall, which has come about, is a very knee jerk type. One should still have some money left in this share.
What about Centurion Bank, what did you make of the price and the dilution of 20 per cent which has come through after the placement and the LKB swap yesterday?
That could be mildly negative for Centurion BoP. In my mind, unlike BoP which had a tremendous network and a huge deposit base at low cost, Lord Krishna Bank is not bringing anything great to the party.
It has its share of NPAs and it doesn't have a strong management. So Centurion has a lot of work to do here and I think the shareholder dilution would take its toll on the price though the bank is growing very fast. But in my view it is mildly negative.
A quick word from you on oil stocks- do you think the second coming will lead to a breakout in HPCL and BPCL?
It looks like that. The type of buying that we have seen in oil stocks in the last one month is really fantastic. The type of money that's gone into that has not been from speculators.
My sense is that there is a feeling that the government may go back to implement some of the portions of the Rangarajan Committee Report, which allows marketing companies to fix prices atleast every month, which means that the bleeding stops. So you could see some fundamental buying coming into oil.
Now that some of the laggards have started moving like textiles, a couple of media stocks, do you think they will catch up now?
Yes I think so, especially the banking sector, which is seeing buying in midcap as well as largecaps, and so also media, driven by TV 18, Zee and few other stocks.
So these two counters look very strong. Also, I have seen smart money slowly moving out of commodities like metal, cement, sugar, the heros of the last. They are definitely losing their sheen.
What about the real estate pack? Do you expect to see any collateral impact of what happened with DLF?
I think the real estate pack had taken a toss in the last two months, they corrected severely and are now back again. Though the fact that DLF, which is the biggest real estate company in India, and very much sought after, pulled the listing document out at the very last minute. This was not because of any reason other than the regulators investigating them.
This definitely makes investors seem that this sector is not too transparent. The problem with real estate is the transparency. Investors still feel there is lot of black money in the industry. So this type of pulling up of the number one company does send shivers to small investors.
How would you look at the construction companies now because they had sort of cooled off from concerns that the margins may be under pressure and they might not be able to deliver a strong bottomline growth as the order book might suggest. But there is a comeback, what could you do with the likes of IVRCL, Era Constructions etc?
They are very good buys, the whole sector infact. In the first quarter, construction companies did see margin pressure because of many of the fixed price contracts. Then when cement and steel prices went up, they did see a bit of pressure.
But they have handled that very well. The new contracts that they have are all very profitable at good EBITDA margins, and the type of order book that these people have is something unimaginable. So there are a lot of good picks, the only thing is that there are no blue chips there; they are all midcaps. So one will have to take a bit of a risk while buying these stocks.
What would you do with textiles? There has been some rekindling of interest in stocks like Alok industries, Arvind Mills etc. Would you look at them again?
Yes, we are looking at textiles very seriously now because there is serious buying going on. That sector has been the worst performing sector of this bull market, there is no doubt about that. But it's globalised now; quotas have been removed.
There are good companies; India is globally competitive, except for the fact that people were a bit disappointed that Indian companies didn't capitalise on the globalisation. But things are changing; we are looking at the leaders like Alok Industries, Arvind Mills and to some extent Gokaldas Exports also.
What do you expect will lead this market this time around or through this month?
My guess is banks and to some extent IT. Towards the month-end, people will start talking about the IT second quarter results, and they will be pretty good with the rupee depreciating the way it did.
Of course in banks also there are many value picks left across the spectrum. So these two sectors, and to some extent oil, of course being the dark horse, would lead the Sensex up.
Disclosures: We did some buying in United Western and we have positions in Zee Telefilms.
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