Harendra Kumar, head, institutional equities and global research, Elara Capital tells Krishna Merchant that he expects foreign inflows to begin in the second-half of this year
After the Union Budget in February, the volumes on the Bombay Stock Exchange have fallen. Do you feel this rally will be sustained?
Well, I would not read too much into this. I do not think that the upside will be sustained. We have seen some buying in smallcaps, but the largecaps are pretty much flat. I believe that the upside will be capped at 18,600 (sensex level).
Do you feel India will be able to attract foreign institutional inflows in 2011?
I do not see inflows coming in now, but I expect inflows to begin in the second-half of this year, as macro conditions will be better, inflation will be under-control and developed markets would become expensive in terms of valuation at that time.
Do you expect volatility to ease out in the near future?
No, on the contrary, I expect volatility to increase because the markets are probably going to trend downwards.
Is it a good time to buy banking stocks given the correction?
I believe the banks would trade sideways in the medium-term. We are not optimistic on the credit growth.
What is your outlook for the information technology (I-T) space? Any stocks that you would like to recommend in the I-T pack?
The I-T sector is expected to give 10-15 per cent returns for the year, which is reasonable. We like Infosys from a medium-term perspective and HCL Technologies as a long-term bet.
What is your outlook on National Thermal Power Corporation (NTPC) and Steel Authority of India (SAIL)?
We have a slightly neutral-to negative-view on SAIL, because there is no expansion happening. As regards to NTPC, there have been delays in projects and besides issues exist on the coal front.
The delivery-based volumes have fallen 42 per cent from the highs in November to 39 per cent now. Does this decline bother you?
Yes, it is a cause of concern, as it indicates that there is no fresh buying interest in stocks for the markets to go up from current levels.