Seshadri Bharathan, Director Stock Broking at Dawnay Day AV Financial Services says that sectors like IT and metals seem valuable now.

He adds that midcap IT stocks are seeing some action at this point of time.

Excerpts from CNBC-TV18's exclusive interview with Seshadri Bharathan:   

Q: We have just started result season, a lot of biggies are expected today. What sectors are you looking from largecap, midcaps universe and where do you see most value emerging at this stage?

A: Let’s first look at the markets. The improved sentiment in US and in India the improved sentiment is due to in-line expectation of the Q4 results. This has given a positive lift to the market. As far as market goes I feel that most of the frontline stocks should be able to live up to the expectations as far as Q4 numbers goes and there would be value emerging from the midcap and the largecap stocks, especially the frontline largecap stocks. As we have seen last week the focus was more on IT, this week we are seeing focus more on metal stocks, overall the sentiment in the market has improved.

Q: Has IT surprised you and if you track Infotech would you make a call on the stock as well?

A: I would not be able to make a call on Infotech but generally, the revenue guidance if one looks at the Satyam numbers also, Satyam’s guidance for EPS is in-line with the expectations. So generally what we are seeing is, the IT companies are giving good guidance for the next year and are beating the expectations of the market. Also the revenue model is shifting to nonlinear, where higher revenue is expected from a proportionatly lesser number of workforce. So somewhere the IT companies also are adjusting their business models, which is improving the revenue numbers for the companies.

Q: Are you recommending any stocks from the midcap IT space?

A: If we look at the midcap IT stocks like Sasken or Polaris, they are driven by news like Polaris Board of Directors has approved some buyback. Even Sasken is looking at a buyback. There is also a rumor that they might be taking some stake in Aztec Software, so what we are seeing in the midcap IT space is where the companies are lacking the verticals, they are adding on those verticals by either taking stake or buying back those companies. So I think midcap IT is seeing some action at this point of time.

Q: How would play the banks post the CRR hike going into that all-important credit policy met? Has most of this been factored in? Are valuations still extremely attractive on banks?

A: If I look at banks, during the peak bull run private banks were valued at price to book value of anywhere between 4.5-6. Today it is around 2-2.5. The PSU banks were around 1.5-2.5 is around 1-1.5. The concerns in banks are clear that the inflation rate is going up. The credit offtake has not happened because of the increasing yield, the mark-to-market losses are increasing the bond prices etc. their treasury gains would not be significant this quarter. So I think banks to a certain extent would be affected in this quarter but in the long run these make for a good buying opportunity for any investor.

Q: What are you expecting from the oil and gas space and particularly from Reliance given the numbers have come out?

A: The topline for the quarter should grow around 31-32%. The bottomline should grow around 28-29%. The gross refining margins and the guidance that they gave us - USD 15/bbl - I think they should be able to beat that, so I think the results should be in-line with expectations.