2007 to be bullish: Raamdeo Agarwal

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2007 to be bullish: Raamdeo Agarwal

Raamdeo Agrawal of Motilal Oswal Securities gives a forward view on how 2007 will pan out. He believes that the earnings momentum is unlikely to slowdown in 2007, which according to him is a bullish year, and says that Q3 earnings growth is seen at 45% (YoY).

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS And the hot stocks for 2007 are... Clear skies ahead; time to invest: Ramesh Damani Consumer durables, pharma to do well: Rajat Bose FIIs to augment liquidity largely: DSP ML May month crucial for mkts: JMMS ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Balrampur Chini Mills | Bajaj Hindusthan | Bharat Petroleum Corporation | Dr Reddys Laboratories | Housing Development Finance Corporation | Hero Motocorp | Hindustan Petroleum Corporation | Indian Oil Corporation | Infosys | ITC | Kirloskar Brothers | Matrix Laboratories | NMDC | Piramal Healthcare | Oil and Natural Gas Corporation | Pantaloon Retail | Reliance Industries | Ranbaxy Laboratories | Steel Authority of India | Mahindra Satyam | Wipro |

Q: What about the Oil and Gas sector, which has been one of your consistent wealth creators over the last five years - last year it didn't create too much wealth; for example, at least two companies HPCL and BPCL?

A: HPCL , BPCL valuations throw a terrific opportunity for one to buy into. I personally think that going forward three to four years into the future, these companies can create wealth.

The only thing is that the government policy is not on their side, thanks to the relentless rise in oil price. But as soon as oil prices become reasonable, the government's policy will fall in line and in the next two to three years, things will be in place and their profitability will be restored rather than damage further. But the market is apprehensive as to whether the profits will ever come back.

Q: Two more sectors which you have highlighted as being key wealth creators over a span of 2001 to 2006 were sugar and metals. How do you forecast their performance in the coming year?

A: In 2001, nobody wanted to touch sugar shares. They were available at such crazy valuations, may be 0.2 or 0.3 times book-value and didn't exist on the face of stock market. Then suddenly one drought in Maharashtra changed the entire economics of Indian sugar from a complete glut to a complete shortage.

This year, we started of with practically zero inventory and the sugar prices went up from Rs 13 to around Rs 21-22 and the market came back from nowhere to massive profits. Actually I was also surprised to see that it is amongst the second-fastest wealth creating business in the last five years.

With metals also the situation was similar. Before the 2002-2003 boom, the they were considered as almost untouchable. Sail was trading around Rs four to five and nobody wanted to even touch it. Even I personally didn't think that Sail could ever make significant money, but today it is a debt-free company. It is a company, which is almost making a billion dollars and has a strong cash flow, because of which there is an upturn in the prices of the stock currently.

To really find a great wealth creator you have to buy the stock when nobody wants to look at it; it is thrown out and it is practically available free of cost.

Q: How would you gauge sugar in that scale because it had a good run in the last three years? Last year though was a bad year for sugar and the last six months gave almost negative returns.

A: The sugar business has a future; clearly it has a future in India. But even current valuations are nowhere close to attractive because the bigger companies like Bajaj Hindustan and Balrampur Chini are still trading at 1.5 times to two times their book-value.