Action returning to largecap counters: PN Vijay

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Portfolio Manager P N Vijay said there has been a strong rally in midcaps and smallcaps. "They have been hitting new highs." However, the big money is moving to largecaps, he said. "We need to see leadership from sectors like oil and energy, banks, and FMCG. It seems like the big guys are coming back."

 

Excerpts from CNBC-TV18's exclusive interview with PN Vijay:

 

Q: Are you getting any sense that the that the largecaps are beginning to stage a come back, last few days many of the Reliance, FMCG kind of stocks have moved do you think it's possible?

 

A: It is possible because I'm also noticing that the midcaps are still quite strong. The midcap and smallcaps are seeing more and more new highs on the exchanges being hit by them on the other hand the big money is slowly moving back into the big stocks. This should happen sometime because we still need that type of leadership from sectors like oil and energy, banks and maybe FMCG also to take this rally forward. To an extent I'm pleased to see the big guys coming back slowly into their own.

 

Q: How would you approach FMCG now and what do you like from amongst there, the big Nifty boys or some of the smaller niche stories?

 

A: Well FMCG has been so down and out for the last three years for the reasons I think because this is the bull market about growth, this is the bull market about infrastructure, investments etc and FMCG are really bellwether stocks. But people are now in a value-investing mode in 2008 and are getting a bit tired of chasing growth. There is a bit of value investing.

 

From that point of view a share like Nestle India seems to be very good to me. It has very strong balance sheet, very strong track record of bonuses, very strong market share and everything that they do and of course one can't think of a better parentage than Nestle. So if one were to look at a pretty safe, sound investment in FMCG, Nestle India could be a good one. 

 

Q: Two stocks and what would you do with them at these prices, Reliance Petroleum and IFCI ?

 

A: I don't share the enthusiasm that is being seen in the market on Reliance Petroleum. It has been just so operated driven it seized to be an energy stock in my view. My sense from what I'm hearing that there is a merger on the cards between Reliance Petroleum and Reliance Industries , which is going to be working in, Reliance Industries favour. So if I were an investor I would have sort of encash at this level on Reliance Petroleum because I feel it is not sustainable.

 

IFCI is a total dark horse because all of us know that the deal iss officially off. So people who are buying IFCI at Rs 95 are really hoping that the deal will come back into the front burner sooner than later, otherwise there is no great value in that stock to buy at this level. There may be insiders and they may something but seeing the way that the government works it's not going to start a failed rebid so fast like the private sector. I'm slightly negative on IFCI at this point in time. 

 

Q: What would you do with sugar now?

 

A: Well it's getting sweeter by the day, it's really hit the bottom. It is a typical commodity which has passed through a bad cycle and which is right at the bottom. One could wait for the next balance sheets to come, which will be splashed in red or one could take the view of 2008-09, sowings are going to be far less in sugar because of the very remunerative prices that the farmers are getting for wheat and paddy, which means that we are going into a situation from glut of scarcity in about12 to 18 months. One could pick up sugar stocks the frontline one's with a 12 months perspective in my view.

 

contd on pg 2..