Moneycontrol
Apr 12, 2013 03:54 PM IST | Source: CNBC-TV18

Betting on pharma, IT & consumer goods: Anand Rathi

Sandeep Shenoy, analyst, Anand Rathi Financial Services feels pharma, IT and consumer goods sector will post positive returns in the days to come.


Sandeep Shenoy, analyst, Anand Rathi Financial Services feels pharma, IT and consumer goods sector will post positive returns in the days to come.


Meanwhile IT major Infosys tanked nearly 19 percent on back of poor Q4 results.


Also read: Infosys is shorting idea; Japan's trumped India: Arora


"It is going to be quite some time before Infosys could even come back to a semblance of its previous glory. So it is not going to jump up in a hurry unless at least two quarters of good results come. That is going to be quite sometime away," Shenoy adds.


Below is the edited transcript of Shenoy's interview to CNBC-TV18.


Q: After this 18 percent crash, do you think Infosys has adjusted itself or do you see more pain ahead for the stock?


A: I am of the opinion that adjustment may have happened for the current set of numbers and maybe now we are seeing immediate reaction. The market is trying to figure out whether there is a structural impairment of the business model of a so-called strong company called Infosys. The market is grappling with that and maybe it has been grappling with that for last four quarters. There is no clear answer inside. So, it is going to be quite some time before Infosys could even come back to a semblance of its previous glory. It is not going to jump up in a hurry unless at least two quarters of good results come.


Q: I was wondering how much more deterioration in price can one see?


A: I do not think it is going to have too much of a deterioration hereon. In a largecap company with a high disclosure standard, the adjustment of whatever data is publically available happens in a span of minutes. That is what generally efficient markets are about. So, in case of companies like Infosys, the adjustments happen in a jiffy and that has happened. The market is still trying to grapple with the structural impairment and I do not think the current price movement probably conveys that the structural impairment may also have got adjusted in today’s price. 


Q: Is this an impairment of Infosys' business model? Or would you worry for the sector?


A: This is probably a bellwether company and of course, it is too rigid about its margins and certain other business aspects but that has its positives and negatives. We are bearing the negativity of that. However, a company in transition generally has these kinds of glitches which normally hit it atleast few quarters. However, in case of Infosys it may have gone for a slightly extended period.


I don't think this is going to be a tick mark against the other bellwether which is Tata Consultancy Services (TCS). But then, TCS is richly valued and its ability to absorb any scope or any glitches in earning is also very low. In case of any volatility in markets, it is generally the bellwethers that are more susceptible. So, in that case, probability may also be slowly getting loaded against TCS.


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Q: What will provide leadership in this market particularly if you look into FY14?


A: It is a good question and that is what all analysts are trying to figure out, to safeguard their capital in these kinds of trying circumstances. Consumer or healthcare would be the set of stocks which could give some kind of safe haven in days of volatility but a mega cap like TCS would have been the most stabilising force in the market. By just the sheer size and its ability to give some kind of predictability in earnings, it may help to garner the status of stabilising factor on the market. However, that is just more on the hope front. But yes, it is going to be difficult for quite a few of these sectors to even provide semblance of stability because it is a question of averages after multiple quarters of good and predictable earning. It is a question of time before some predictability in their earnings also come in.


Q: What is the sense you are getting? Up until two days back, we almost thought that 5200 is round the corner. Are you getting a sense that severe break downs in the market are possible and that could be led by lack of global liquidity?


A: I probably would belong to the set of people where we feel 5500-5600 is going to be a level which is going to hold on for the Nifty in the short-term. I don't foresee a sharp breakdown to 5200 level, but then the market has an uncanny ability to prove everybody wrong. I believe and I hope that I am not going to be wrong on that front. We feel that 5500-5600 is going to hold on, but yes it is going to be drudge from here before some kind of semblance of uptrend comes.


Q: What would you latch on to say up until end of 2013?

A: The sectors which we feel are going to be positive or which could be some kind of saving grace in the entire turbulence ahead is consumer, healthcare and IT. Infosys may not be a glitch on that. The other ones where we feel negativity is going to be there is metals, materials and energy. Rest of the sectors we are neutral.

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