What are IIFL Wealth's favourite picks for the season?

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What are IIFL Wealth's favourite picks for the season?

Prashasta Seth, Senior Fund Manager, IIFL Wealth is betting on FMCG, pharma and auto.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS CV sales to pick up in Jan-Mar quarter: Sanju Verma Big correction in markets unlikely: Veda Investments Asset price bubbles in EMs getting bigger: Jim Walker ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news 3i Infotech | Punjab National Bank | Indian Overseas Bank | Bank Of Baroda | Dabur India | Colgate Palmolive (India) | Bajaj Auto | Maruti Suzuki India |

In an interview with CNBC-TV18, Prashasta Seth, Senior Fund Manager, IIFL Wealth, spoke about his reading of the markets, his outlook and what his favourite picks for the season are.

Here is a verbatim transcript.

Q: Over the past few months, 5,000 has been a pretty much magnetic level, we did get that dip but we keep on levitating back to this 5,000 zone. How would you trade at this time, would you book profits at this stage, do you sense that this time since the retracement back was so quick and so sharp, this may actually be that phase where we break pass some of those resistance zones of 5,200 and we may see a parabolic sort of rise towards year end?

A: My sense is that we will probably start petering away again at the highs of the previous rallies something that we saw in October-5,200-5,300 levels.

So at that point we will probably start booking profits at least for once. The markets can obviously move higher from there depending on how the global clues span out. If you see most of the Asian markets like Hang Seng, they are trading at last one year highs. So obviously I think we could see another 5-7% upward movement from here. But at that point I think we would probably start getting a bit cautious and would advice some amount of profit booking. There also the markets can move from another 5-7% but I think at that point your risk reward ratios start beginning to look a bit weak.

Q: There are some out in the market who believe that this short dollar, long equity trade that you described in the Brazil, Russia, India, China (BRIC) can go on well into taking the Indian equity markets even upto the 20,000-21,000 mark. Do you think that is possible?

A: I think that is definitely possible but I don't think that the levels would be sustained if they reached. You would again see some sort of breakdown happening like we saw it last time. So though you may reach and be there for some amount of time, you would not be able to sustain that because even at 1,100 earnings of FY11, you would be trading very expensive at those levels. So I would probably not be participating in that leg of rally, might miss out on the last 5-7% of the rally but my sense would be to stay away from that rally because all these liquidity driven rallies when they unwind, you see a very sharp downmove and it is best to stay away from those moves.

Q: At the moment you are giving us a sense that you would still be picking up for another 5-7% and maybe in some stocks there is even more headroom, what are you buying if at all?

A: We are continuing to buy the same set of stocks that we have been buying for the last three-four months. So we are picking stocks selectively in the IT space. I still like stocks in the fast moving consumer goods (FMCG), pharma and to an extent auto. So we continue to buy the same set of stocks. We are picking up some midcap banking stocks as well specially on the public sector undertaking (PSU) side where we believe the valuations are still reasonably comfortable. So just to give you some names, we are looking at Patni , 3i on the IT side. we are looking at Punjab National Bank (PNB), Indian Overseas Bank (IOB), Bank of Baroda (BoB) on the banking space. We are looking at Dabur  and Colgate on the FMCG space and  Bajaj Auto and Maruti on the auto space. So we have been buying these stocks for the last nine-twelve months and we continue to buy these stocks at dips.

Q: At what level would you take an aggressive cash call?

A: I think we will look at 5,300 Nifty levels to start looking at aggressive cash calls but before that we will probably be invested at least for now.