Dawnay Day is bullish on banks, capital goods

Sheshadri Bharatan of Dawnay Day AV Financial Services said that baking stocks such as Axis Bank, HDFC Bank, Punjab National Bank and SBI are good to invest in. He also feels that a couple of capital goods companies are the frontline stocks that the investors need to invest in.

Here is a verbatim transcript of the exclusive interview with Sheshadri Bharatan on CNBC-TV18. Also watch the accompanying video.

Q: What is your own take? Did you actually hear institutions coming in and buying at lower levels and that triggering short covering? What was the story today?

A: What has happened in the last weekend, globally––for example G7 countries, ECB meeting committing, etc.––that the institutions would do anything to bailout and tide over the financial crisis. The UK central bank is supporting a couple of banks there with USD 76 million of liquidity inflow. The Finance Minister of India said that the government will do anything to tide over this liquidity crisis and would infuse the funds. So, overall what we are hearing across global markets is that everybody is interested in resolving this financial crisis and to a certain extent that has led to the short covering in the market and a couple of frontline stocks also witness some kind of fund buying there.

Q: Are the clients feeling convinced about this move and the kind of resolution these banks would bring about for the crisis?

A: It is too early to say that but what we are seeing is that the levels that we are in, people say that more or less the worst is behind us. If we have to talk about markets then a maximum 5% or 10% fall would be there. What people are saying is that these are attractive levels to enter. If investors have Rs 100, at least invest 30–40% of the money in these kinds of markets and as and when markets goes up book profits and re-enter.

Q: What is your own sense on when the markets will go up since so much is predicated on that–any potential buying? Do you think this is a long lean patch or do you think we are going to come very quickly out of this?

A: I think so because if one looks at the August numbers and compare that with say July numbers, I don’t believe that the numbers are 1.3%. It can go down to such low levels. But having said that India as an economy has to grow more than 7% GDP. India should see more than 7% GDP growth and there are opportunities in this kind of market, valuations are there. What was happening in the market is the relentless selling.

Q: But the main question is are you seeing the markets go to further depths or do you think most of the selling is over and when do you see genuine recovery of say even 20-30%. What kind of recovery would that be?

A: It is a very difficult question to answer but I genuinely feel that around 3200–3100 we might be on the verge of bottoming out and if there is a recovery then there would be a sharp recovery as we are seeing today of 200 point on Nifty. So, till 3700–3800 we might see sharp recovery in the markets.

Q: What would you be advising people to buy?

A: As I have always said stocks such as Axis Bank, HDFC Bank, public sector units like Punjab National Bank and SBI and a couple of capital goods companies are the frontline stocks that the investors need to invest in.

Q: What is your take on the Axis Bank numbers? Do you think you could expect above expected numbers or good numbers from other banks both private and public?

A: A couple of banks should do well. Axis Bank obliviously has surprised us by a topline growth of 56% and a bottomline growth of 77%. These numbers are beyond expectations. Most of the banks should be in-line with the expectation.