In an interview to CNBC-TV18, Sandeep S Shenoy of Pioneer Investcorp shared his readings and outlook on specific stocks and sectors.
Below is the verbatim transcript of Sandeep S Shenoy's interview to Sonia Shenoy & Anuj Singhal.
Anuj: Do you think 2017 could be different for equities, could be a better year than 2016?
A: Brokers always survive on hope, so we will start the year saying that it is going to be good but somewhere down the line, after one or two quarters, rationality always sets in.
However, one worrisome part is that for the last three years we have been beginning the financial year as well as the calendar year with good hope and somewhere down the line earning degradation happens and this could be the fourth year where we could be having flat earnings per share (EPS) on index front, but somewhere or other we have to scout for opportunities to outdo the market and that is what all of us are trying to do.
Sonia: These opportunities generally comes pre-Budget in some of the commodity related spaces, the fertilisers, the sectors that expect some sort of subsidy, in fact in fertiliser space we have been speaking to companies and they are saying that the direct benefit transfer could get kicked in this Budget for that sector. Is that a space that you would be looking at, at least up until the Budget?
A: One thing I have learned over the last many years is never try to get into sector which has got too huge variables; one is commodity prices and second is government intervention. It makes good sense.
In fertiliser sector the marketcap is not much and it is not going to move the needle for the entire market. Yes, for a brave heart trader or maybe a marginal speculator, it may make sense for him to latch on to this sector.
I think trying to punt on pre-Budget rally in both railway related stocks and subsidiary related stocks - I think that game is over. However, longer-term investors have to scout for some other opportunities. This could give some toss of the coin or flipping a coin kind of a trade but it is not going to be sustainable.
Sonia: How are you positioned on some of the auto numbers? Tata Motors came out with good Jaguar Land Rover (JLR) sales yesterday for the US market and in general the momentum has been picking up, anything that you would be interested to buy there?
A: The impact on the domestic sale has been quite visible. We have seen it in two-wheelers and probably you will be seeing a lag effect on detrimental side on four-wheelers also. Yes, on longer term basis this is one sector which was showing some kind of a bulletproof tendency. This is a sector which I would classify as buy on dips. You may get some kind of whiplash correction down the line in the next few weeks because of extraneous news. The fundamentals of the sector are not impacted but yes, you will get good pricing opportunity in the next few weeks and investors who are both long-term as well as medium-term should lap that opportunity.
Anuj: What about IT. We are hearing noises on visa issues - Donald Trump rhetoric is not settling - do you think there are more downside for IT stocks?
A: This sector has size, scale and also predictability of earnings. Of course this rhetoric may put some kind of question mark on the predictability but let us face it; the cash flow generation of large players is humongous. So when market is going through challenging times when premium comes for cash flow as well as predictability, I think IT will come right at the top.
It is going through some kind of a squeeze, some kind of a headwind and some kind of a shadow being cast on it but this sector will survive and one has to be very clear on that and the large players especially long only funds, this sector will be there on their shopping list. So on factor of sheer resilience, it is a sector which most of them will not ignore, so that is going to be a buy on dip for anybody who is wanting to be in Indian stock market for a longer period of time.
For entire interview, watch accompanying video.