Don’t buy now, book profits: Amit Nalin Secs

Q: What about the whole construction and infrastructure space?

A: The business of construction is absolutely all right. There could be some margin pressure going forward, if they have any contracts which don’t allow them to pass on their costs. But besides that, the numbers have been fine and people have come back because they have fallen to almost 60% off their highs. There has been a bounce back from there. But for them to show us a huge move upwards from here, that’s difficult because they are already expensive stocks. Right now, we are not looking at discounting earnings in an aggressive manner in the market on a whole. So, they are fairly priced right now. But fundamentally, they are all right and I don’t see any big risk over there at all.

Q: How would you play the steel sector now?

A: The positive on the steel sector is the increased capacities giving them boosted bottomlines. What worries me in steel is buoyancy in steel prices, which we have seen in the last six months and it is continuing now in the global markets.

If that starts coming down, that can remain a big risk because raw material prices have not been showing any weakness right now. That could perhaps be something to be worried about in the next quarter or the quarter after that. But for the April to June quarter, the results will be much better for almost all steel companies which have larger exports of global capacities.

Q: What about some of the other commodities or the numbers they reported like sugar and fertilizers?

A: Sugar remains a positive in terms of its ability to absorb the higher price of sugarcane. There is definitely a cause for them to feel better than what they were two quarters ago. In terms of valuations, they are now at 10-11 times forward for most of the leading companies.

I was surprised that Balrampur said that they are making money in sugar. Most of the money they have made in the other segments is not completely true. Sugar companies are making money in the underlying commodities also. Where aluminium is concerned, it is very difficult to say. But everybody believes that commodities worldwide with the fall in the dollar had become nothing more than a big bubble. If the dollar starts strengthening, which the dollar is showing signs of, then these commodities may take a little bit of a respite in prices from where they are.

Q: What do you expect to see from the midcap universe for this month?

A: The results for every company on which people didn’t have enough research or were not confident about, have been re-valued 20-30% from their lows. Any stock which has gone down to less than 5-6 PE has come back to 8-10 times.

I don’t see midcaps being able to trade at 14-15 times. I don’t see that much money in the system and that much confidence. But definitely it is 10-12 times for midcaps that are growing and have sound fundamentals. The market will definitely move the price up as the results are disclosed in the next month or two.