Portfolio manager, PN Vijay of askpnvijay.com is bullish on Axis Bank amongst the banks caught in the Cobra-post expose. Vijay believes the market will now see beta-play on Axis Bank.
"It is a good bank. Today their asset profile is fairly well distributed and quite profitable. So, the balance sheet of the bank is good, the valuations are reasonable," adds Vijay in an interview to CNBC-TV18.
The market saw a four percent correction in a week, so it will need a good trigger to see a robust rally, he said.
Below is the edited transcript of Vijay's interview to CNBC-TV18
Q: This week was best forgotten by the market, we saw 4 percent slide, lowest levels in 2013. Do you think we are headed lower now?
A: In the short-term may be, because there is an absence of good news flow. Whatever we have had in the last two weeks, after a relatively good Budget, was just awful. First we had the bank exposé on the three private banks which had a very bad impact on sentiment. That was followed by the Cyprus crisis. Then ofcourse, we had the DMK pulling out of the UPA government and all that on the Sri Lanka issue. So there is a dearth of good news.
However, the RBI deputy governor had said that these three banks actually knew money laundering did take place. The Congress too seems to be riding the DMK without too much or no talk of a no-confidence motion. And global markets are slowly coming to terms with the fact that Cyprus is a very small economy and something will happen to sort it out.
So, as we enter the coming week, the horrible issues of the last 10 days are atleast not on peoples mind. However, that is not enough to go and buy stocks. What you need is some good trigger to buy stocks. I am hoping that something like that may come about. However if that doesn’t happen in a truncated week of a few trading days, we might just pass through certain uneventful stock specific days in the market.
Q: The one worry that the market has had this week is that a lot of these best-in-class private sector banks started to come off. We saw ICICI Bank dip below Rs 1000 before recovering. There has been pressure on names like Axis Bank etc because of all those allegations. Would you use this as an opportunity to buy into any of them and if yes which one would it be?
A: Most certainly. Among these three banks which were in the exposé, I choose Axis Bank purely because it has got a relatively higher beta. ICICI is slightly less and HDFC has a very low beta. So, if we work on the assumption that the market will work itself up, it is logical that the beta-play should be on Axis Bank. It is a good bank. I think they don't have the NPA (non-performing asset) worries that some others have and their NIM (net interest margin) is pretty impressive. They have made a change over into a more retail and individual focus bank from the good old days when they were some sort of UTIs bank.
Today their asset profile is fairly well distributed and quite profitable. So, the balance sheet of the bank is good, the valuations are reasonable. And most importantly, after touching Rs 1450 not so long ago, they have corrected all the way down. So Axis Bank is a relatively safe pick where your returns may be pretty substantial.
Q: You have Glenmark Pharma that you have picked out. What would the strategy be there?
A: Glenmark is a good midcap pharma stock and it is driven by current sentiment in the market. If and when the market improves, the first buying interest ofcourse will be in the large caps and then some of the most stable midcaps followed by midcap pharma counters.
Now, Glenmark on the other hand has been slipping down and it is unlike Glenmark to underperform like that for a long time. It had gone all the way upto Rs 550 not too long ago and it is now around Rs 485. It is a very strong business model that is export driven, research driven going into off-patent US companies and they have done it very consistently and very remarkably. Its valuations are decent. So, you will lose little going into Glenmark at Rs 485 and you may get up to Rs 540-550 in next two-three months.