2010 to see range-bound market: Edelweiss

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Investors cautiously optimistic on India: BNP Paribas Balanced Budget-led rally coming to an end: Infina Fin 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 Tata Motors | Ashok Leyland | Jubilant Foodworks | State Bank of India | Bank Of Baroda | ICICI Bank | HDFC Bank | Pantaloon Retail | Titan Industries | Bharti Airtel | Idea Cellular |

Q: What is your sense of how the market goes into this April earning season because in a couple of weeks we will start talking about that? Do you see that as a major trigger or do you think the market pretty much know what is coming in earnings, its more global than local even going into April?

A: I would think we will continue to be more global than local for at least next couple of months. I think the earnings for this quarter is pretty well known-we will have good positive surprises, I do not think we have too many negative surprises. My view apart from the market being range bound is that we will definitely have a lot of stock specific action as we keep on going on and maybe some amount of sector specific action. For example, post Budget the entire banks, financial services and insurance (BFSI) sector looks very interesting. Of course this quarter numbers might not be as great but you will see continuous uptick in sectors like that. Auto, for example, we will see good numbers in this quarter also, I think February has been an outstanding month but even March the numbers should be pretty good.

So there will be sectors where you will see numbers to be very strong, positive and there will be sector where numbers might not be as strong but the outlook will be pretty strong. By and large, there is a reasonably strong, positive bias but without being euphoric about it.

Q: Would Tata Motors be a buy from those autos?

A: Absolutely, amongst the entire auto space we are most bullish on the commercial vehicle (CV) space; if you look at two-wheelers, four-wheelers and CVs. And of course Tata Motors and Ashok Leyland both are our top picks in that space and both of them look reasonably attractively valued, the CV cycle is just about four-five months in the positive cycle now so there is still quite a long way to go for the cycle so that's our house view and we are very bullish over there.

Q: Between the two if you had to pick one would you pickup an Ashok Leyland which is a pure CV play or Tata Motors which has got a global element through Jaguar-Land Rover (JLR) in it?

A: Currently, we have a reasonably strong buy on both. If you only want to play the domestic CV play you may want to choose Ashok Leyland but Tata Motors has done very well and the upside on the global play might also come in over the next 12 months if the global economy stabilises and does well. It is very much a portfolio call-Tata Motors is of course much as a larger company and the larger fund therefore anyway keep an exposure on the stock.

So its very portfolio specific and what kind of investors are. But I would pretty much look at both of them maybe on a 60:40 kind of an allocation or 70:30 kind of an allocation between Tata Motors and Ashok Leyland.

Q: You were talking about the BFSI space, what is most exciting in those pockets, is it some of the non-banking financial banking companies (NBFCs) that became lively after the Budget or is it a private versus public sector bank call?

A: Both but banking is a much larger call and in banking, ICICI Bank has done well and it continues to look very good; valuations still very much strongly support ICICI Bank and if they start pushing on retail credit growth again. So overall also in the economy our view is that post this Budget the economy is going to be reasonably vibrant which means credit offtake will keep on taking off in the next couple of quarters. If that happens the entire banking sector ends up doing very well. That's first call.

Secondly, we do not expect interest rates to move up too much further from here; we believe the government is not in a mood of tightening interest rates, they are in a mood of wanting growth to continue in the economy. It's been pretty clear. If that continues to remain, there is no other negative for the banking sector per se.

So when you look at these two things together and if credit offtake starts taking off in a bigger way banks will obviously do very well amongst them ICICI Bank on the private sector side is one of our top picks. We also like HDFC Bank . The logic is that every time the cycle turns, HDFC Bank is one of the first one to do well, they have a very high quality management team. So although it always is expensive it will continue to remain expensive and it will do very well in the first six months of a credit cycle upturn so the stock will also do very well.

On the public sector side, we prefer currently Bank of Baroda over other public sector banks but once the State Bank of India either the transaction happens or this announcement is over obviously State Bank of India has been underperforming in the last few days. You will see a big uptick in that bank. You clearly see as we go through the next few months, stock after stock in the banking sector will start showing performance.

NBFCs are driven by one, credit offtake at their level and second, now a lot of buzz around whether some of them will get banking licenses and if that happens how their economics changes and therefore what is the advantage that one may get out of few of those stocks. But overall the sector should do well. In any growing economy, BFSI sector has to do very well and it's been very well proven and we continue to be very strong about the sector.

Q: Do you track Jubilant Foodworks ?

A: Structurally, three big legs of the economy we keep on talking about it and I think the consumption leg of the economy, we are talking about the strong growth, auto is just on component of the consumption leg, retail is the other big leg of the entire consumption story.

So BFSI supports the services and infrastructure we will have a chat but consumption is very strong, definitely retail is going to do well. In fact the hypothesis we have in retail in slightly different now-we believe the first five years retail as a format was getting accepted in the economy in the first 7-10 years and now retail is already accepted as a format. I think now you will see the maturity of the entire industry coming into play over the next three-five years. So look at companies like Pantaloons , Titan , Jubilant Foodworks and a lot of these companies have got reasonably good scale and are now incrementally a lot of sophisticated in their approach to building their future and you will see a lot of that getting reflected in terms of how these stocks perform.

They are not cheap at present point of time, most of them are trading at around 18-20 times one-year forward earnings and above that but they will continue to remain expensive because they show strong growth. So I would be very positive on Jubilant Foodworks, I would be reasonably positive on Titan, Pantaloons and maybe even other retail stories.

Q: Has the time come to buy Bharti Airtel or an Idea Cellular ?

A: My view continues to remain the same. I think till we start seeing signs of consolidation in the sector, I would like to try and play telecom through different routes rather than playing through the service operators.

In fact very interesting opportunity that has opened up in telecom which is there aren't too many listed players but the entire handset market in India has exploded. We saw a private deal happening in a company called Micromax, which got valued at USD 300 million. There is one listed company Spice Mobile that I know of and this morning I saw in the newspaper Carbon Mobile, which is another handset manufacturer is also sponsoring the Indian Premier League (IPL). You will see a lot of these kinds of companies over the next few months including the ones which are listed, show very strong growth. I was looking at numbers in the industry, Nokia who has been a market leader was at about 65%-odd around a year back is down to about 53% and the next player is probably about 10%. These are industry numbers. But effectively you have a lot of space for a lot of home grown and other efficient handset manufactures. If you also correlate this story to what happened in the mobile service sector over the last four-five years when we had a big retail push, people are looking for handset in Rs 1,500 or Rs 1,000 at the lower end to maybe Rs 3,000 price range, which is where the big uptick is happening.

So you are looking at huge opportunity. The numbers today are mind boggling; currently about 12 million handsets that get sold every month and the average price point is about Rs 2,300. Talking about Rs 2,500 to Rs 3,000 crore industry per month and there isn't any significant listed player in that industry other than Spice Mobile.

So I would look at people like those, I would look at the tower companies. I find a lot of value around those and there aren't too many listed stocks at this point of time but service providers are very competitive. My view is we have to start seeing consolidation or we will have to see some of these people going global and therefore doing something different over there. But I am in no hurry to look at telecom service provider currently.