At Emkay within private sector banks they prefer ICICI Bank, HDFC, HDFC Bank over Axis. They have been overweight on IT and recommend buying Hexaware Technologies and eClerx Services.
Anish Damania, Emkay Global Financial Services expects weakness in market as it nears expiry, and as more results start flowing in. Nifty will trade in a band of 5200-6100.
Sector specific they have been bullish on auto, IT space. Funds are now seen shifting their attention to companies that have good cash yield, good cash flow and little bit of an earnings growth, he says.
Market is rewarding stocks that have reported better-than-expected or in-line of expectation numbers.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Your word in terms of the earnings that we have seen. Tata Consultancy Services (TCS) has been a hit. Bajaj Auto numbers have reacted well. Axis Bank was good as well yesterday. What have you summed up?
A: These are the preliminary set of numbers and typically we find that at the start of the season good numbers come about. These are in industries which are in a way resilient to whatever has been happening around.
We have been bullish on the two wheeler space, more on Hero MotoCorp, less on Bajaj Auto though and we have been bullish on the IT sector. So that is panning itself out. Given that the options for investments have got limited after what the Reserve Bank of India (RBI) did, the funds have shifted their attention to stocks which are having good cash yield, good cash flow and little bit of an earnings growth. So attention has come back to the two wheeler segment, IT segment and the pharma segment.
Q: Do you think Bajaj Auto's performance is better than expected? The stock has fired up 3.3 percent.
A: It is in line with expectations. If you look at all the analyst estimates broadly numbers are okay. There were some forex losses, but one must realise that this loss is due to hedging, which is part of the operating income. It means sales would have been booked higher and against that there was a hedge, so you saw that loss.
One needs to take that into account in the operating income. Even if you do that, margins are better than the previous quarter and probably in line with the expectations. So, anything that is in line with expectations or better, the market seems to be rewarding it at this point of time.
Q: How have you looked at the private banks? Are you surprised positively with Axis Bank? Do you have any buy on the stock? What is the post-result reaction?
A: Axis' numbers have been better than our expectations on most of the counts. We have a hold on this stock with a target price of somewhere around Rs 1,250. It is around that price. So typically for us the stock had fallen to somewhere around Rs 1,150 and it has recovered its momentum back here.
At present we do not have a negative view on Axis Bank, so it is a hold. However within the private sector banks we like ICICI Bank, Housing Development Finance Corporation (HDFC) and HDFC Bank more than Axis Bank.
Q: What is your expectation in terms of a Nifty range going into two key events, first the July RBI policy, which coincides with the Federal Open Market Committee (FOMC) policy from the US along with the end of earnings season which would be August 15th?
A: For Nifty, we expect a band between 5200-6100. That is the band which we have been expecting since the last one year and it has stayed very much within this band and it is going to be no different.
We are now almost at a level where the gains are capped. I am not seeing any interest coming from the Foreign Institutional Investors (FII) still into the Indian market and you continue to see outflows. So as such this band probably could be a peakish kind of a band and as we go into the expiry, I would start seeing weakness coming into the market as more results start flowing in.
A: We already have a buy on Hexaware and e-Clerx Services. Midcap IT is something which we have been marketing. We are having positive bias on MindTree. So IT as a segment we have been overweight and we have been recommending over last one or two quarters to enter into Hexaware.