Mehraboon Irani recommends avoiding financial companies at the moment like Power Finance Corporation as it is still unpredictable what further steps Reserve Bank of India might take to tighten the market liquidity.
Mehraboon Irani, Nirmal Bang Securities suggests investors not to hurry and exit from the IT, FMCG and pharma sector despite their expensive valuations.
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Speaking to CNBC-TV18, he recommends avoiding financial companies at the moment as it is still unpredictable what further steps Reserve Bank of India might take to tighten the market liquidity.
Irani strictly suggests to stay away from capital goods sector as it may get cheaper going ahead. "There will be a time where you may possibly go and buy into Crompton or L&T which are the best bets in this space. But the time has not yet come and there is no reason why one should be going and buying in a hurry," he adds.
Below is the verbatim transcript of Mehraboon Irani's interview on CNBC-TV18
Q: IT and FMCG are at the top of the list of stocks that have held up the market up until now. If you had to book profits out of either of these spaces which ones would you be cautious on now?
A: It is a difficult call. While it is true that valuations have become expensive, the fact is that the environment is getting murkier every passing day and virtually investors are loosing count of how many names can I invest in. Like it was 50 stocks, now it is less than 30-35 companies. Among them, the pharmaceutical may have a stood out. But should one sell into them is what my view and could go wrong ultimately.
The situation will get more and more polarized, things are getting difficult. In this situation if I exit from some of these names which have withstood this downturn quite remarkably then what do I go and buy? Power is out, infrastructure is out, metals is out, real estate is out, capital goods is out, PSU banks is out. IT, pharma and FMCG remain the names where I will continue to put my money.
They are expensive in terms of valuation, but I am still not seeing any turn in investment cycle. So when I don't have any opportunities available, the situation is going to get more polarized and may be after a temporary decline you could find valuations of these companies going up further from their present levels. So we are not in a hurry to recommend investors to come out of FMCG, IT and pharma at the moment.
Q: How would you approach stock like Power Finance Corporation Limited (PFC) now? The numbers were good, the stock was up almost 12 percent on Monday.
A: Fairly decent numbers and there could be some more upside on this stock but overall as far as financials go I would like to reserve my comment and ask people not to be in a hurry to go and buy into financials right now because the situation is getting more and more challenging.
We really don't know what will happen as far as the RBI’s next move in trying to tame the rupee which it has so far failed despite all liquidity tightening measures. So buying into a financial company at this point in time is something I would like to avoid.
Q: Crompton Greaves announces numbers today. What are you expecting and how would you approach that name at Rs 80-82?
A: For the last two quarters I was tempted to go and buy into the stock. Nothing negative about it but looking at the way the investment cycle is, the complete sector is clear cut no.
Be it Crompton, be it Bharat Heavy Electricals (BHEL) which has become a disaster or be it even Larsen and Toubro (L&T) that many people argue in valuations terms is attractive.
I have told investors specifically to avoid this sector for the simple reason that you may get it cheaper and there are no reasons for you to buy into stock just because it has come down.
There will be a time where you may possibly go and buy into Crompton or L&T which are the best bets in this space. But the time has not yet come and there is no reason why one should be going and buying in a hurry.