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Apr 25, 2013 07:32 PM IST | Source: CNBC-TV18

No large mkt moves seen for next 6 months: Amit Dalal

This particular market rally that has started does have strength, says Amit Dalal, executive director of Tata Investment Corporation Ltd.

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The ongoing market rally that has started does have strength, says Amit Dalal, executive director of Tata Investment Corporation Ltd.

Talking to CNBC-TV18, he says that one should remain positive on trades for the time being. But in the long or the medium-term, you will see volatility, and get the chance to buy at lower levels, and sell at higher levels.

But the market will not take off on either side in the next six months, he says. He recommends a ‘buy’ on SpiceJet and Hindustan Zinc.

Here is the edited transcript of his interview with CNBC-TV18.

Q: It has been an extremely strong and steady series that we have seen all the way up to 5,900. How much of an incremental rise do you see on the Nifty and what do you think will possibly push it higher if that is the case?

A: Some of the results are helping the stocks to gain more strength like an Axis Bank result. Further, negative surprises like an Infosys, which took a beating and the market with it has been a part of the correction towards the end of March. So, this particular rally that has started does have strength. One should remain positive on one’s trades for the time being.

Q: What could this strength actually manifest into because the rally has been quite quick-paced in the last couple of weeks? Do you see the same fervor continue or do you think the history of the month of May suggests there could be some profit taking on the cards, post which we could resume an uptrend?

A: In United States there is a saying ‘sell in May and go away’ so definitely, United States, which has a had a very good market for almost three or four months now with deteriorating data may definitely see a sell-off in sometime. Where our markets are concerned, I am completely in tandem with the view which was expressed about 10 minutes ago.

It’s strange. We were making a report for our own company’s business plan for the year and what we summaries in terms of what we see ahead is very much what the gentleman from Nomura Securities talked about.

So, I don’t think our market has a potential of a run-away possibility. I would definitely sell into a market which is rising with fervor, so I would not think that we can potentially go up much higher from here.

However, the trend right now is strong, so for traders it makes sense to remain on the positive side. But in the long or the medium-term, you will see volatility, you will get chances to buy at lower levels, you will get chances to sell at a higher level. I don’t think the next six months will see the market take off on either side in large fashion.

Q: We have seen a lot of participation come in from the private banking space this time around in terms of earnings. What is your expectation going forward in terms of private banking space fundamentals? Do you think that this is a good opportunity to actually accumulate?

A: The valuations have become a little expensive for mid-tier private sector banks. The large ones strangely still remain inexpensively valued mainly because they have still got inherited asset concerns and that’s why you still get these banks at less than mid-teen earnings.

But these mid-tier banks like ING Visa or Inducing which gave its results recently do not have that baggage of a bad asset book.

There is more and more following because they are showing us better numbers, and that’s not going to change because they are going to get more market share. They have the skill sets to penetrate the market when cost of funds are so high for borrowers and show us good results in the quarters ahead.

Q: Have you watched the aviation space closely and would you take any kind of position in Jet Airways or SpiceJet post what took place on Wednesday?

A: The Jet Airways news came as a surprise because there was so much suspense going on for almost six months - I am doing it, I am not doing it. The stock had lost fervor and therefore when this news came the markets rewarded with whatever appreciations that have taken place in the last 24 hours.

Where SpiceJet is concerned, I am in favour of investing in that stock not only because what they may do with a joint venture partner but because it is a very efficiently-managed company.

There are only two companies and perhaps now even one more in the airline space which is managed very efficiently. You see it when you travel, you see the numbers coming out – they suffered in terms of their EBITDA margins, both because of oil and the undue competition. But with the sector perhaps consolidating, it makes sense to buy these stocks.

Q: What are your views on the Hindustan Zinc numbers and what your perspective would be pretty much on the metal space at this point in time?

A: In terms of commodity prices, they will remain soft. Zinc does not follow the same pattern as aluminium or iron ore, which tends to be more industrial commodities of large mining and available capacities, which tends to reduce their prices faster.

I don’t follow Hindustan Zinc stock closely, but once you see there has been any increase in volumes – if they have any huge increase in volumes coming up for next year and therefore this Rs 2,000 crore profit after tax (PAT) which we saw -- I think that’s a number which came on screen, and is going to be the quarterly number which we see going forward then definitely, I see it as an relatively and inexpensively valued stock and investors should consider it seriously.

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