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See potential demand in cap goods space: Anagram
Published on Wed, Jul 16, 2008 at 09:27 , Updated at Wed, Jul 16, 2008 at 16:29
Source : CNBC-TV18
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Munesh Khanna, Chairman of Anagram Stock Broking is of the view that the overall market is not going high at this point of time and the pain continues. He feels that capital goods is a space that one would like to observe very closely. According to him, there is a lot of latent potential demand for the capital goods sector coming into the next few months and going into the future. Excerpts from CNBC-TV18’s exclusive interview with Munesh Khanna: Q: Is Ranbaxy in for a bounce or would you be apprehensive on that clarification which has come in? A: What Malvinder Singh, CEO & MD of Ranbaxy, said was very affirmative, direct and he has the support of Daiichi Sankyo along with him to make completely unilateral statements that the deal is on. If that is the position then there would be some bounce back in that stock. Q: How will you approach capital goods and real estate now after the kind of falls that they have seen over the last few sessions? A: The overall market in our view is not going high at this point of time and the pain continues. But capital goods is a space that one would like to observe very closely. The cue that we are taking is that if we look at the Chinese currency to the dollar that has kind of appreciated 11%, we have had a rupee-dollar devaluation of about 10% in the last six-nine months. Therefore, if we just put the Chinese currency versus the Indian currency vis-à-vis the overall US dollar then we have got a 20%-22% appreciation in the Chinese currency. That we believe should be good for the capital goods sector. If we do look at the order book for the capital goods, it is pretty robust.
We believe that there is a lot of latent potential demand for the capital goods sector coming into the next few months and going into the future. Out of all this gloom and mess, it is a sector that one would be looking at very carefully. There is a potential upside again not in the short-term because the short-term is pretty dark but over a longer-term period we believe that this sector does have potential to give adequate returns.
Q: What is your sense? Is this a bear market, which will lead us lower over the next few months? How do you foresee the next two quarters for this market? A: We have been a little pessimistic for some time and our view is that we are in a bearish situation. We do not expect things to improve at all substantially in the next six-twelve months definitely in the next three-four months. The market is not really going anywhere. We could go a little lower at these levels. We will have these dead cat bounces regularly but by and large there is no impetus for the market to move.
Valuations are cheaper than what they were six months ago. We are at 13 times FY09 earnings and that implies that there is a 17%-18% growth from 2008 earnings provided corporate results comes out as expected. We have got all the issues like inflation, crude prices, rising interest costs and the fact is that the demand is slackening. Consumers are differing on decisions to buy. They are trading in higher value aspirations for lower value buys and there is an overall slowdown in demand, which is going to effect the corporate results. So, we can relook at it in September-October after the politics have settled down in India. Politics have more or less settled down in the US and one has got some sense of where the oil is going to be at that point of time and what has happened on the credit crisis in the US. But until that time, we are more or less in this rut. Q: There is one view that the market is now entering a phase where it is just going to grind to lower levels and amongst the other things most importantly mutual fund redemption will start kicking in. do you see that or sense that happening? A: The markets will just keep grinding at these levels and a little lower. That will put pressure on some redemptions and will make people differ on trading decisions. It will ensure that people are not going to come back into the market in hurry, which is going to compound the issue. So, given everything that has happened, we are in the grind and this grind is not a short-term grind.
Q: What is the best way to approach this market right now? Do you keep buying these dips and get knocked further or do you say for the moment I am not going to be brave, I will just protect capital, probably stay in cash and play the waiting game? Which one looks like a better strategy for the next two-three quarters? So definitely the strategy would be stay in cash, wait for more corrections and look at the re-rated earnings expectations and then start buying from a longer-term horizon. Disclosures: It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed. |
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Other comments
Worse slowdown yet to hit markets
Excellent post ramesh aha!!...
in Market Outlook - Short Term - radhika_nandlal at 11-Oct-08 07:54
Worse slowdown yet to hit markets
The Media often gets away with many things because public memory is just short! This is one thing you can keep sho...
in Market Outlook - Short Term - rameshaha at 11-Oct-08 07:31
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