Indian markets have been an underperformer versus its global peers. What is your call on Indian equities during this month ahead of the Budget? What range do you see the Nifty in the near-term?
I think Indian market (Nifty) is at 5,000 or below in terms of valuations, thanks to cash settlement system in India on account of higher exposure of FII’s in Nifty and Sensex stocks and continued buying. I believe 5,850-5,900 is a level which seems be holding till budget. If budget is bad then we expect sell off till 5,500. On the upside 6,100 is the resistance in Feb due to call writing and it can test 6,300. If it breaks 6,120 that could happen if budget meets street expectations.
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What is your take on corporate earnings during the past quarter? Any sectors you wish to highlight that have done better?
Corporate earnings are improving in third. Oil & Gas and PSU banks have done well.
Which three major announcements in the Union Budget could give a boost to the capital markets going forward?
Fiscal deficit at 4.8%, removal of Securities Transaction Tax (STT) and introduction of physical settlement are 3 factors which can boost the sentiments.
According to Morgan Stanley's report, FII ownership in 75 biggest companies at all-time high. What is your view on this?
Yes FII investment in Nifty and Sensex stocks is at all time high. However, the FII holding in India Inc is still lower than Dec 2007 level. In my opinion FII will raise further stake in power, oil and PSU banks.
The broader markets are under performing the benchmark indices. Do you feel that the trend will continue? Can you suggest three stocks from the mid-cap pack that one can buy/sell at the current levels from a medium-term perspective?
Yes broader markets are under performing the benchmark and may continue for some more time as policies are against retail investors come back. I suggest buying IOC, Century Textiles, PFC and OBC for medium to long term perspective.
What is your investment strategy given the current scenario? Which sectors are you bullish/bearish on?
I am extremely bullish on power, oil and gas and PSU banks. The way Finance Minister is talking I think there is no reason to be bearish in India. Even risk reward is in favour of long side. 5500 lower side 7000 upside.
What is your take on the defensive sectors, pharma and FMCG? Are there any stocks both in the pharma and FMCG space whose valuations are still attractive at current levels?
I am per se not enthused on defensive Pharma and FMCG sector as these sectors are over owned. Any downgrade can wipe off investors capital.
What is your call on PSU mid-cap banks and which are the top two picks for the next financial year?
I am extremely bullish on PSU banks as I understand govt is doing lot of reforms in power sectors. Tariff hike is in pipe line. This will revive PSU banks. OBC and Canara Bank should be the best picks in PSU banks. Yet I suggest ICICI Bank and SBI which looks really good from large cap picks.