Flows will continue till the valuations look steep: Gajendra Nagpal

Interview with founder and CEO, Unicon Investment Solutions

The markets broke out from the range-bound consolidation phase and have been trending up since the past few sessions. Gajendra Nagpal, founder and CEO, Unicon Investment Solutions tells Abhishek Vasudev that the Sensex can scale up to 21,000 levels by March-end if the positive sentiment continues. Edited excerpts:

The markets have seen a good up move after trading range-bound for quite some time. Why this sudden up move and do you see this momentum continuing? What are your March-end targets for the Sensex and Nifty?

The expectation from Parliament’s winter session on the reform front and the feel good factor that worst is over has proved to be a sentiment changer for the markets. The revival of the capex cycle, the  expectation of reversal of interest cycle going ahead along with continuous support from foreign institutional investors (FII) flow are few factors that have enabled the Nifty to break out of the range-bound / consolidation phase.

Besides, credit rating agency Moody's statement on India's outlook also had a positive impact. The momentum should continue and provide gradual upside support to the index. The Sensex can scale up to 21,000 levels by March-end if the positive sentiment sustains, while the Nifty could be around 6,000 levels.

How do you see the Obama administration addressing the “fiscal cliff” issue going ahead?

The 'fiscal cliff' issue would not be resolved in one go. The immediate issue is whether the tax cuts that originated in the administration of President George W. Bush should be extended beyond December 31 for all taxpayers including the affluent, as Republicans want, or just for less wealthy taxpayers, with income under $250,000, as Democratic President Obama wants.

Until the two sides get over the immediate tax issue, they will not move forward to serious discussions on longer-term deficit reduction and tax reform, though both have expressed interest in doing so.

Foreign flows (FII flows) in the Indian markets have been to the tune of $19 billion year-to-date (YTD). How do you see them panning out in the next calendar year?

Funds will continue to come in till the valuations look steep. We may not see flows as high as 2012, but they would be substantial given the implementation of reforms and visibility of earnings coming through.

Which sectors are looking attractive at the current juncture on the basis of valuations? Are there any stocks that you like in particular at the current levels?

On sectoral basis, we like, banking, metals, capital goods and mid-caps. As far as specific stocks are concerned, Wipro, Ranbaxy, REC, Appolo Tyres, Dish TV and Hindalco are looking attractive on the basis of valuations.

Realty sector stocks have been doing well. What is your medium-term outlook on this sector? Are there any contrarian bets?

There is stock specific interest visible in this space; and we like stocks such as DB Realty, HDIL and Unitech.

Precious metals, especially gold, registered a new high in the rupee terms. What is your outlook for the yellow metal?

Gold has, in last few years, become a part of core portfolio of investors considering the uncertainty in global markets and issues emerging at frequent intervals. It is a safe-haven bet and we feel this asset class would continue to occupy larger space in investors’ portfolio and suggest buying at every dip and partially book profits on bigger rallies.