Next 9 months to be tough for mkts: IL&FS

R Sreesankar of IL&FS Investsmart feels that the markets are not going to run off in a hurry but we have to bear in mind that market got oversold. A rally closer to 2000-points was in offing because the kind of discounts that was there in futures, were very high, he said.

He said, “The bounceback is over and we are waiting for the corporate results followed up by what is in store for us for the current and next quarter. The cues that we get from the monsoon front are not very positive and we are waiting to see what's going to happen on the credit policy on July 29. Probably, The Central Bank is going to tighten the monetary policy.  Hence, we have tougher nine-months ahead of us.”

Excerpts from CNBC-TV18’s exclusive interview with R Sreesankar:

Q: After a very good run up that we saw a day before yesterday, two-days of mellow performance, today it is grinding lower. What's the outlook looking like for the markets?

A: Markets are not going to run off in a hurry but we have to bear in mind that market got oversold. A rally closer to 2000-points was in offing because the kind of discounts that was there in futures, were very high. It had to narrow down and we have seen a lot of short covering also happen around the same period. The bounceback is over and we are waiting for the corporate results followed up by what is in store for us for the current and next quarter.

The cues that we get from the monsoon front are not very positive and we are waiting to see what's going to happen on the credit policy on July 29. Probably, central bank is going to tighten the monetary policy.  Hence, we have tougher nine-months ahead of us.  

Q: What are you buying in this market?

A: Pharma sector is still looking good but it is stock specific. For a space like cement, we saw USD 225 enterprise value. Companies, which used to have an enterprise value at the peak have come down dramatically. Shree Cement’s enterprise value has come down to USD 55 or so.

These valuations are valuations because people don’t expect the cement companies to perform. All of a sudden, everything has been discounted for the worst. One is going to see if the growth continues to happen even at around 7% to 8%, with huge amount of delays happening. Companies, which have already got their capacities commissioned and operational look reasonable.

Prices have corrected in the infrastructure space. In the last two-days, the stocks were up 25% from the correction. So, one has to be very choosy out there and the horizon has to be much more longer-term. Infrastructure is one space, which we will enter into. We are positive power ancillary space as well.