Gautam Sinha Roy of Motilal Oswal, expects to see a pullback in short term but in a broader sense, feels market is likely to correct for another 1-2 months. He says this correction will give opportunity to buy many stocks from different sectors. "The elections will create volatility in the Indian markets going forward and one should be careful of these developments while picking sectors and stock," he told CNBC-TV18.
Below is the edited transcript of his interview to CNBC-TV18.
Q: The market is down 4 percent this week compared to last week. Do you think the market is headed for further lows?
A: The market may see a pullback in the short term as we saw broad-based beating down of the market across all the sectors The broader cues continue to be negative, specially the fresh developments in Cyprus. The market may see more correction in next 1-2 months and that hopefully should give good entry points for many stocks of different sectors.
Q: As of now the Indian market seemed to have underperformed the globe or the European markets as well as the Asian peers. The European markets were down around 1-2 percent odd for the week and they still have today’s trading session, but we are down around 4 percent odd. We have had a lot of domestic cues to deal with this week, but in general what would the correlation be according to you for us vis-à-vis our global peers?
A: The correlation remains strong that if risk-off trade happens and we saw gold moving up and equities moving down this week and India being an emerging market high-beta asset class has fallen a bit more, plus the domestic political developments have taken a worst turn, that has added to the pressure. We do not expect the political situation to be very rosy as we are heading towards an election year.
Typically, in an election year there are many political equations changes. The elections will create volatility in the Indian markets going forward. One should be careful about these developments while picking sectors and stock.
Q: Are you advising any buys at this point either from the frontliners or broader market?
A: One can buy ICICI Bank if it corrects more by another 5 percent. From demand recovery prospective, IT stocks like Infosys and Tech Mahindra are good picks. Apart from that one can stick to defensives like pharmaceuticals. There are not too many opportunities in consumer space. However, one can take a look at Lupin and Dr Reddy’s Laboratories.
Q: What was your recommendation to clients for the Steel Authority of India (SAIL) Offer For Sale (OFS)?
A: It has been offered at a good discount. The outlook for metal stock continues to remain weak in the near-term. It however looks good from a long term investment perspective.
Q: What is your view on DLF, there were many buy reports on expectations of better performance once the NCR launch comes through, but the stock has seen a 15 percent knock this week, would you buy it now?
A: If the broader market remains weak then there is no point in buying high beta stock like DLF but if the market bounces back then one should buy this stock.