Inflation, interest rates to cool off by FY10: Religare Sec

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Amitabh Chakraborty of Religare Securities sees an improvement in market sentiment. He expects the interest rates and inflation numbers to cool down by next year. There would also be a new government in place by next year, he added.

Chakraborty sees crude prices coming down to double digits. He added that experts see a lot of optimism in the market. So, he feels the market sentiment would definitely improve.

Excerpts from CNBC-TV18's exclusive interview with Amitabh Chakraborty :

Q: From 4,400, how much upside do you see for the Nifty in the near-term?

A: The sentiment is changing. Interest rate will start coming down by early next year. There would be a new government in place after the election. Inflation will be under control by early next year. Crude price will also be in double-digit dollar by the end of this year.

The Reserve Bank of India (RBI)�s experts survey says the corporate earnings growth of from Q1- Q3 would be low but, there will be an uptrend in Q4. Experts say that Q3 would be the worst quarter. Experts see optimism in the market going forward.

The Q1 numbers surprised us. We thought that Sensex earnings growth would be 10.7% but calculations show that growth was 15.8% in the Q1 results. Sentiment will change in a year�s time.

Q: What is your call on the steel sector right now? Yesterday, that was the top-performing sector, what do you make of the newsflow on prices being raised and not being raised and what would you tell your investors to do on steel now?

A: Yesterday, there was a meeting of steel producers in Delhi. We are bullish on the steel sector in the longer-term. These are short-term blips that last for two-months. If government controls the iron ore price rise it would be positive for the steel sector. Steel is a good sector to be in for 6-9 months, one-year period.

Experts say oil price may come down to USD 108/bbl and that is seen is the next support level.

Q: What is your take on the sugar sector, things seem to have improved a bit on the ground, stock prices have inched up, are you a buyer in that sector or circumspect?

A: We like sugar and tea sector in the agricommodity space because of fundamental reasons. We expect ethanol to be compulsorily blended 10%. Brazil would be exporting less sugar to the world market this year that will keep the sugar prices in world market up.

The production of sugarcane this year would be much less, to the extent of 22 million tonne, that is an official figure but our estimate is slightly lower. This would be due to the bad weather in the north. A lot of sugar cultivators have diverted to producing wheat because wheat prices were up and somehow they did not get the money from mills for last two-three years, the farmers. So net-net the acreage has sunk and production would be much lower. This is a win-win situation for the sugar.

The tea sector has already increased their prices. There would be more price increase due to political problems in Kenya. Production is down in the north as the weather is not suitable for tea cultivation.

Both tea and sugar are very high operating sectors in the industry. Rs 1 per kg increase directly adds to 50-60 crore at the bottomline. These two sectors are very good bets over the next six-seven months.

Disclosures:

It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.


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Inflation, interest rates to cool off by FY10: Religare Sec

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