Apr 09, 2013 06:36 PM IST | Source: CNBC-TV18

Market directionless; be stock-specific: Antique

Dhirendra Tiwari of Antique Institutional Equities, feels that right now the market is moving directionless, which is a cause of worry. The current valuations at 13-14 times FY14 earnings, is neither too expensive nor too cheap.

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Dhirendra Tiwari of Antique Institutional Equities says the market is moving directionless, which is a cause of worry right now. "The current valuations at 13-14 times FY14 earnings, is neither too expensive nor too cheap," he told CNBC-TV18 in an interview. 

He also pointed out that the upcoming election is a big event, which the market and FIIs are waiting for and the election outcome can turn the direction of the market.

"In the current market, one should be very choosy while picking up stocks of companies and sectors," says Tiwari.

Below is the edited transcript of his interview to CNBC-TV18.

Q: What should an investor do in this type of market? Is it time to be greedy when the market is fearful? Would you be putting in any money to work at this point or do you think there are better levels that you would watch for?

A: I think the market is directionless, which is the biggest worry. The valuations at 13-14 times FY14 earnings, is neither too expensive nor too cheap, so we are in between.

It becomes very difficult for us to take a firm view, which way the market will move considering that there are few events like election, ground situation not improving and unhealthy macro environment.

One should look at case-by-case stocks, sectors and try to find out good value opportunity, don’t look at the index. There are very good opportunities across sectors in the current environment.

Select stocks from pharma, consumer space, IT stocks and midcaps can be picked up. The market can grow at about 8-10 percent in the current calendar year. Some stocks can give good buying opportunities, so select buying is advisable. Companies which can give a return of 15-17 percent earning growth in FY14 should be added to the portfolios.

Q: We are at levels which we haven't seen all the way since September 2012 and at the same time the reform agenda began for large part of the economy which we been talking about up till now. Do you think that the markets have pretty much become a bit sanguine or complacent about the economic reform agenda and they want to see something little more aggressive now from the government maybe something like the Land Acquisition Bill being passed faster, etc?

A: Reform was one big driver for the market. The market looked very uncertain in the middle of last year and probably market would have fallen meaningfully if we did not see certain reforms that we eventually initiated. So, market did take notice of a few of these things whether it is broadcasting reforms or foreign direct investment (FDI) in retail, etc and diesel price regulation is the biggest reforms that is happening at the moment. The market is still holding on due to these reasons.

The market would have corrected even more with respect to the economic environment that we are living in. Some based had been made based on these reforms. The market and particularly, the FIIs will be looking for delivery in next six months and how we are able to address the challenges in the economy and how we are able to continue the reform path.  The market has taken a note of that and action is needed on part of the government to accelerate that.

Q: There has been some amount of redemption coming in from the ETFs. How worried would you be now in terms of outflows from the FII basket and what sort of incremental pressure do you think it could put on the markets?

A: It can put quite a meaningful impact. My biggest worry will be that typically, the action by FIIs or any other investment made by non-Indian investors will be dependent on lot of events like election and reforms.

These two factors are the key risks today. We had good news flow on the reforms front right from September start 2012 to till date and apart from diesel price hike there are very few bills left but not too much is happening as far as reforms are concerned.

Second, foreign investors are waiting to look at the election outcome. So, this creates uncertainty and many foreign investors are quite wary of uncertain political environment. So, elections will have a major impact. Hopefully, we will have some support from domestic investments.  

Q: How do you approach IT earnings in general and what kind of a trigger it could be for the market and what is the expectation from Infosys?

A: Growth in the US and Europe and rupee will drive earnings of IT stocks. There is an incremental positive catalyst for IT stocks. We are seeing some improvement in the growth outlook for the US economy, which will be important from most of the IT companies from revenues point of view.

If we assume that everything remains the same, rupee depreciation will add to the profitability. So, there is highly likely event of Infosys or maybe few other IT stocks beating estimates by a few points. Infosys, Wipro, Tech Mahindra are some of these stocks are of some interest because of these issues. So, there is chance that Infosys and few other IT stocks which are showing improvement in the outlook will do well in this quarter and maybe few quarters in the remaining part of the current year.

Q: In this market would it be an opportune time to build positions in certain stocks. Would you have a buy call on certain counters at this point?

A: We like Sun Pharma and Lupin in the pharma sector. In IT space we like Infosys and Tech Mahindra. We have preference for certain consumer monopolies like ITC and Nestle. Shriram Transport is our pick in the NBFC space and few consumer facing stocks namely in the media sector. Some of these stocks may outperform by 10-15 percent. 


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