Experts bullish on steel sector

Q: What is happening in the metal space with regards to steel and how would you play that sector from here on?

Tekchandani: I would be a buyer because input costs are going up and the government is making a noise. This actually provides an opportunity if one takes a 3-6 months view. The numbers would also be pretty robust and demand looks sustainable going forward. So, I won’t be negative. One has seen that politicians have to do whatever they have to do as they are in an election environment. If you look at our own inflation numbers, about 40% comes from food. So, that’s the area which possibly requires a great deal of attention. This is effectively driven by what is happening to cost rather than end prices of steel and cement companies.

Q: What have you read into the results of IT companies? Are you convinced by the general opinion that we have got from managements that after the first quarter they could see better times for themselves?

Tekchandani: The guys who are telling you that have been performing effectively for close to 15-17 years, right from 1992-93 onwards. I have significant faith in these guys as they have been running their companies exceedingly well and managing expectations. Yes, there has been a run up of about 15-20% in stock prices, since the market kind of bottomed out or rather tanked in the early part of the year. If there was a correction now for whatever reasons, it should be an opportunity because I cannot see many companies who can tell you about their one-year visibility and guidance, and then stick to it and actually kind of deliver. However, their returns on the upside would not be huge.

There is a better opportunity to go and hunt for shares, not necessarily in IT but any sector to make significantly higher returns. In the topline companies, after this 15-20% correction, which is we are witnessing today, gets over, one will still continue to make that over one-year. Investor appetite over the last four-years has changed very dramatically.

Investors are always angling for 60-80-100%. They have to also kind of marry the risk into all this environments when they think about such high returns.

Chakraborty's disclosures:

I do not hold any stocks discussed today, but Religare's clients might have positions in any or all of them.