The Nifty rallied above 6000 on Tuesday, its highest levels since February 4, 2013. Gautam Sinha Roy, Motilal Oswal Securities expects another 200 point upside from current levels in Nifty.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What are you making in terms of the strong run that we have seen for the markets, the Nifty is currently sitting pretty at 6000. Do you think that there is further upside?
A: We have seen a pretty decent rally. Instead it was a healthy one with most of the good quality sectors including FMCG, pharma and private banks leading the rally. We are yet to see the classic high beta sectors participating fully in the rally, although lately they have begun to include metals and realty.
So, this should last for a while. We expect another 200 point at least kind of upside from current levels in Nifty. Hopefully the higher beta sectors should also come in to play, now that most of the high quality frontline names have done well. Last month there has been some improvement in the Indian macro too so that was the trigger point for this rally and that is continuing.
We are seeing healthy set of numbers in the quarterly results too. The other trigger, which was bottoming out of the quarterly results cycle which was expected to happen this quarter seems to come true. So, that is another good reason for the market to cheer and go up. So, we should expect this to continue for a while.
Q: Do you track Sintex Industries? The topline looks okay but the margins have actually done worse than what we were estimating and even lower on a year on year basis - any thoughts there?
A: I haven’t looked at the numbers closely yet, but this stock was one of the candidates for a bounce back in numbers. They are really beaten down in the bad part of the cycle last year.
So, there was an expectation that there would be a strong bounce back. We will have to see from where the bounce back has really come. This was definitely one of the stocks which could give a lot of upside from EBITDA perspective too.
Q: Do you track the tyre space and any thoughts on these companies and anything that you would recommend?
A: Apollo Tyres has been looking strong on the charts. That is one stock that we have liked for a while now. Other than that given that the numbers have started coming well that should be a boost for the sector in general. So, we should expect a continued movement in these stocks.
Q: Is this what you were expecting to see, a push by the banking space and by other key heavyweights to this 6050 level or has this come by way of a surprise?
A: The pace and the momentum of the rally is a bit of a surprise especially today’s move. One of the psychological factor which would be helping is the fact that it is above 6000 again. So, that is one number that plays on people’s minds a lot. Good part is that rally is being led by good sectors and valuation wise although these sectors are looking a bit stretched now but not very expensive.
So, that is why we get the comfort that there could be more to the rally. Especially if earnings continue to surprise positively and the macro indicators keep at current kind of levels, more stable and definitely not worsening from what they were a couple of quarters back. So, overall momentum seems to be strong and that should continue going forward too.
Q: What would your opinion be in terms of the broader markets now because we have seen a lot of momentum come in only in the past couple of trading sessions but on a year to date (YTD) basis the midcap index is still reeling under pressure. Would you give it a little more credence in terms of possibly recommending stock specific strategies within the midcaps now?
A: If you have to look for further buy ideas one will have to incrementally push into the midcap space. However, having said that one would probably still stick with high quality sectors including private sector banks, consumer names, even midcap pharma names, we have seen Ipca Laboratories doing well today. So, the further movement in this rally could come from the midcap space that is definite possibility as we said.
However, there is also the other part of the market, the beaten down cyclicals including metals and reality which are seeing some signs of bounce back now. So, that could also be another part where you could see some buying activity coming in. One could pick names from that part too including DLF and Hindalco which have been beaten down a bit and there could be some rally in these stocks.