Feb 11, 2013 05:09 PM IST | Source: CNBC-TV18

Market may drift lower! Experts bet on banking stocks

The BSE Sensex closed the day today at 19659.82; 91.37 points lower than yesterday‘s close. Sudarshan Sukhani of, feels that the market is in a bottoming out process and 5950 could hold a base for the Nifty. Right now, I have short positions in the market with a stop loss of 6,000. I think the market will go down.

The BSE Sensex closed the day today at 19659.82; 91.37 points lower. Sudarshan Sukhani of, feels that the market is in a bottoming out process and 5950 could hold a base for the Nifty. Right now, I have short positions in the market with a stop loss of 6,000. I think the market will go down.

Meanwhile, PN Vijay, portfolio manager,, says that he has a negative view on BoB post weak numbers and his advice to investors would be to avoid the stock currently. He feels that right now there are better choices in the banking sector.

Also read: Budget 2013: No surge in short-term; Budget key to fiscal target: HSBC

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

Q: What is your view on BHEL? It is sitting on 14 times forward, is it good time to buy this stock or do you see more damage for this stock?

A: The stock is already damaged enough. A month back it was trading at Rs 240 and now it is at around Rs 215. The possibility of future damage is less. L&T is not a IT software company or an FMGC company where the turnaround can be substantial nor it is a takeover candidate. The company needs to increase their order book. There is news that they have received of Rs 2000 crore. There should be coal linkages for power plants, ultra-mega projects should be cleared, environment etc. I don't think it is time for bottom fishing on BHEL      

We need at least one good quarter of order accretion and good margins because the competition from Chinese imports, many of the power plants today have Chinese boilers etc, that might abate with the counter veiling duty it takes time and the cycle is quite slow in the case of BHEL. Right now I don't think one should buy BHEL because the price has fallen and it is 14 times earnings. It might be around 14 times earnings for next year also for that matter.

Q: What about the two latest casualties in the PSU banking side, Bank of Baroda (BoB) and UCO Bank, what are you recommending to investors who already hold these stocks?

A: Bank of Baroda again was a very bad surprise. People always gave a premium to Bank of Baroda right through 2012 because of management quality, asset quality, transparency and there was a general perception in the market that Q3, there would be an abatement of provisions and non-performing assets (NPAs) and suddenly Bank of Baroda coming up with such a howler shocked the street.

One of the reasons for accelerated fall in the market is because suddenly everyone is feeling that the public sector undertaking (PSU) banks are still up the wall. There was some good news from Bank of India. So, Bank of Baroda apart from upsetting itself, upsetted the whole banking sector. So, I would avoid this stock. It is inprinciple wrong to buy a stock because it has fallen. BoB at Rs 750-780 will be a good buy option. Right now there are better choices in the banking sector.

Q: Fundamentally, where do you see Jubilant Foodworks headed?

A: Jubilant Food has been a cracker of a stock. Among all the listings we have had in the last few years, it is by far the best. It was available in the bottom of the bear market about Rs 200 and it has moved up five times. Now, Jubilant Food is a typical runaway stock. One is Dunkin Donuts diversification.

The pizza delivery was a great concept in India, and Jubilant rode on it. Dunkin Donuts it is a very time tested brand and it has fantastic a brand and same store sales has also been rather tepid. So, it is passing through a period of not being wanted much.

Titan passed through that period and many rising FMCG stars have passed through that period, but I would not write off the stock. As this fall ends, Jubilant Foodworks at some time will become a buy because it is a stock for the future. Ten years from now we will still talk about Jubilant Foods.

Q: Post market hours, big news is expected with regards to NTPC offer for sale (OFS), what is your view on where the base price could be set at this time around and do you think investors will be hesitant to get into this one because of its history and perhaps Life Insurance Corporation will have to come out and bail NTPC?

A: The price could be between Rs 140 and Rs 145. NTPC's last follow on issue was highly priced and investors haven't made any money. So, the track record is not good for NTPC. Things have improved on ground for NTPC. If one sees the coal availability, power evacuation, plant load factors, escrowing of receivables, restructuring of SEBs, whole lot of it, one can say clearer windscreen is present compared to BHEL.

The operating efficiencies have improved, so around Rs 150 levels there might be many long term investors who are getting back into the India infrastructure story through NTPC because the pricing is quite attractive if they get it around Rs 140-143. I am not sure if LIC will bail out the issue or not. I don't think it will be a run away success like Oil India either with its exciting prospects etc. It will be in the middle, I expect decent investor participation in this issue even without the Life Insurance Corporation of India.

Q: From a stock markets point of view which are the stocks or sectors that you would keep on your radar as we head into the Budget and even buy ahead of the Budget and any kind of announcements that you would want to hear?

A: This Budget would be about macros. Macros are important, the blue chips would definitely attract attention and to the extent the good projection of the fiscal deficit would lead to lower interest rates. I think the financials would be great beneficiaries because increasingly people in Delhi at least are feeling that the real problem for the economy is not only the infrastructure just not moving but crawling, but lack of savings in the economy.

Today, the savings to gross domestic product (GDP) ratio is at one of its lowest and people are not saving. So, unless you have savings and overtime the government has removed many of the props of saving, you had savings for provident fund, insurance policy, you had long term benefits etc. So, there might be some big bang announcement on tax concessions, capital gains, savings etc which would be win-win because investors would be very much hyped up and government may end up getting more by way of revenues.

So, one is expecting much action on the direct taxes front for savings which would again benefit the financial sector, banks and NBFCs and more particularly auto industry. The numbers from heavy vehicle side were disappointing. We are at 80 percent of 2007 in terms of units sold which is a disaster. Some measure needs to be taken to rev up the auto sector which has multiplier effect on the economy. So, these are areas where the government may be compelled to do something.



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