Buy cos with 1-yr earnings visibility; bet on TCS: Antique
On the steep fall seen in Ranbaxy over news of a USFDA import alert, Dhirendra Tiwari, head- research, Antique Institutional Equities. Speaking to CNBC-TV18 says that while he was positive on the stock earlier, he is now cautious on it.
The current market rally will peak out as there isn’t any upside left in the broad market, says Dhirendra Tiwari, head- research, Antique Institutional Equities. Speaking to CNBC-TV18, Tiwari says that investors should now look out for companies that have a one year earnings visibility.
On the stock market performance, Tiwari expects the FY14 earnings growth to be at 8 percent and has a year-end target of 20000.
“If one looks at the current year earnings performance, then our current estimate is about 8 percent and that can see some downward correction. Our view is that the rally will peak out and there is no significant upside left in the broad market as such,” adds Tiwari.
On the steep fall seen in Ranbaxy over news of a USFDA import alert, Tiwari says that while he was positive on the stock earlier, he is now cautious on it.
From select stocks, Tiwari is bullish on IT and has TCS and Tech Mahindra as his top picks.
Below is the edited transcript of Tiwari’s interview to CNBC-TV18.
Q: How will you approach Ranbaxy Laboratories? Current earnings not affected but future earnings could be?
A: Yes, it is a problem and there was a time when one would start tending to be positive on the stock. However, if one looks at the cost of manufacturing in India, in US; there is a significant loss of profitability if one loses manufacturing base. So, we have to take view of the long-term earnings because of this particular development and be little cautious.
Q: How would your desk approach the market at this point in time? Is there a great deal of trading still left or would you advise selling into this rally?
A: We have maintained cautious view on the market since the beginning of the year and our Sensex target has been around 20,000 based on 15 times FY14 earnings of 1295. If one looks at the current year earnings performance, then our current estimate is about 8 percent and that can see some downward correction.
Our view is that the rally will peak out and there is no significant upside left in the broad market as such. That is our view on the market.
However, there is a lot of focus coming back to the quality companies within sectors which are offering earnings visibility. So, there will be few things that will happen. Firstly, there will be focus on quality companies followed by a lot of churn within the sectors and that too at a fast speed and lastly, people will not see significant upside from the broad market.
However, there could be opportunities where there can be a possibility of making significant gains within sectors which are doing well. So, broadly, there’s very limited upside but if I have to remain invested, I will choose my companies within sectors which are offering atleast 12 months of earnings visibility. So, that’s the approach we are taking at our company which has been consistent for last six-seven months.
Q: If you had to give us top stock calls for the day, for the week then what would they be?
A: For the immediate term, we are positive on few pharmaceuticals and IT names and Tech Mahindra has been one of the best stocks that we have had in midcap IT space. We also like Tata Consultancy Services (TCS) in the largecap space. So, in the run up to the likely positive surprise on the performance of IT companies, one would be positive on these stocks in the next three-four weeks