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K Subramanyam, assistant vice-president (institutional research), Asit C. Mehta Securities tells Faraan Tarique that government reforms are essential for the markets from a mid-term perspective. Saying that markets have already discounted the rate hike from US Federal Reserve, he suggests booking partial profits in stocks with sharp gains. Edited excerpts:
Robust US jobs data suggests that growth is picking up in the world's largest economy. How will this and the expectations of a rate hike by the US Federal Reserve impact the Indian markets?
Rate hike expectations are probably discounted and may just have a temporary effect. Reforms at the ground level will be more critical for sustaining interest in the Indian equities. Broadly, one would be advised to take part profits at current levels, particularly in scrips that have seen a sharp run up in the recent months.
The CPI data is due on Friday. With both CPI and WPI data likely to decline further, what is your call on rate-sensitive sectors? What would be your top three picks?
Banking sector should be the preferred space, but I would refrain from picking any stocks now as some cooling off is expected after the franctic rise in the past few months.
The recent trend in metal stocks seems to be contrary to the market movement. With data from China showing signs of weakness, what is your call on the metals sector? Can you suggest any large-cap or mid-cap metal shares that are attractively valued at current levels?
By and large all large cap companies have issues whether it is Tata Steel, Hindalco, Jindal group or others. So, it would be better to focus on user industries, who will be beneficiaries rather than on the metal counters. Autos, auto ancillaries, forgings, etc. would be the preferred space.
Commenting on the rally in the broader markets during your last interaction, you had picked fertilizers, logistics, and specialty chemicals as your preferred picks. Would you now revise or update your list?
All the three sectors look good though in the immediate short term some correction may be seen on account of these sectors being overstretched. From these sectors, Tata Chemicals, Gateway Distriparks, Aarti Industries and Deepak Nitrite would be our preferred picks.
What would be your advice to first-time investors in the stock markets? Given that the movement of indices may mask the actual dynamics of the markets, how should a novice start building up his/her portfolio?
My advice would be not to get carried away and focus on SIP via mutual funds or to follow scrip specific route which will average out holding cost over the period and would bring gains in the long run.
