 "Earnings will look up from the third quarter: Kishor Ostwal")
The Nifty has been range-bound between 8,000 and 8,600 for sometime now on the back of muted first quarter numbers reported by India Inc. Do you see a pick-up in the earnings cycle anytime soon and what largecap names are best placed to take advantage of the revival, if and when it occurs?
The lower commodity prices will reflect in better earnings from the third quarter and I believe that the Nifty will reach 9,400 by that time. Moreover, the pace of reforms is likely to pick up momentum post Feb 16. One should therefore use every opportunity to buy good quality stocks at current valuations. I will stick my neck out in PSU banks, metals, and oil and gas sector. Select infra stocks could also be on the buying list. If I have to name a few stocks, RIL, SBI, BOB, PNB, INDUS IND Bank, Tata Steel, JSW Steel, and Cipla look good and are on a solid wicket. These stocks are great value buys in the prevailing market situation.
The monsoon session of Parliament has been a wash-out. Are the markets factoring in further delays in passage of key economic legislations, especially with the Bihar elections around the corner?
I think the BJP too was not too keen to get the bills passed in Parliament ahead of Bihar elections. Narendra Modi has been the PM for 15 months and yet no major bills are passed. This is clearly due to the situation in Rajya Sabha, where BJP do not have the requisite numbers. Maybe the situation will change by February 2016; if BJP gets a clear majority, they will not require any opposition support. They have managed 15 months and can manage another 6 months. But the opposition has lost credibility due to its approach and this could again be a game-changer for the ruling party. The market knows this fact and there will be a rally in anticipation.
The BSE midcap and smallcap indices are outperforming the BSE benchmark index and are currently trading around record highs. Is the rally sustainable and can you still spot any multi-baggers in the making?
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The fall of midcaps and small caps post the Lehman issue was out of proportion. The large cap Sensex and Nifty stocks recovered at first, while the midcaps and small caps are now performing. The rally will sustain selectively, although many stocks have rallied beyond acceptable levels due to high operator-driven activity. Investors are therefore advised to be cautious while selecting stocks. Some stocks which can still be multi-baggers are Gayatri Projects, Bombay Dyeing, Global Offshore, Mercator, Aurion Pro Solutions and Balasore Alloys.
The government has unveiled a seven-pronged strategy, including Rs 20,000-crore capital infusion and hiring of private sector talent, to rejuvenate PSU banks. Could this be a game-changer for the PSU banking sector and would you look at any PSU banking stocks at the current juncture?
I have already covered PSU banks in large cap stocks. I do agree.
The weakening rupee has been a boon for the export-oriented IT and pharma companies. Would the gains from the rupee depreciation be sustainable over the long-term horizon and what would be your approach vis-a-vis these stocks?
It is difficult to write off China as it has excess capacities and sufficient foreign exchange reserves. China is likely to bounce back after an initial flight of capital. The rupee depreciation could therefore sustain for long. Bank of China has gone on record to say there will not be any more devaluation. India is waiting for a substantial improvement in current account deficit, which in my opinion will be the basis for an appreciation in the rupee. I would therefore avoid companies heavily dependent on rupee depreciation as this could be dangerous for long-term investors.
The government has allowed spectrum sharing, albeit with conditions. Does this make a case for investment in this sector and if so, which are the names that you like?
4 G is the game changer. Digitisation could be a real spark in RIL JIO. RIL could therefore see a re-rating, with a 100% upside in next 3 to 4 years.
There has been a modest uptick in infra spending and stalled projects are witnessing a revival or sorts, albeit at a slow pace. In this backdrop, would you look at any stocks among the infra names?
I will stick will low debt infra companies. High Ground Enterprises could be one such stock as it is entering into dredging for cleaning the Ganga. Other dredging stocks such as Mercator Global Offshore can also give a good upside.
Which stocks/themes do you like and expect to play out over a 12-18 horizon?
PSU banks, metals, oil and gas, and select infra stocks, besides individual stocks that I have already dealt with, could be the themes for the next 12 to 18 months.