Anand Rathi says right time to rebalance portfolio

In an interview to CNBC-TV18, Mehta said, "There will be a lull because there won’t be any reforms as such. Government would be preparing for the elections and budget. So, a stock specific activity will be witnessed in this result season."

"Stocks like Raymond , Apollo Hospitals and NIIT can be considered if one is not looking at index," he added.

Accroding to Mehta, this is the right time to rebalance portfolio and align it with next performing sectors. "It is time that one gets into some rate sensitives like autos, real estate or infrastructure where valuations are cheap," he said.

Below is the edited transcript of Mehta’s interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying video.

Q: It will be very typical that a lot of retail and even HNI investors will be asking you do I step in at this point in time? What are you telling them that sorry you missed the bus at 4,600 or do you tell them that climb on, this looks like something that’s sustainable?

A: In fact around 4,600-4,500 also we had reiterated the same stance, it is time that one looks into one's portfolio and people start coming into performing stocks. So, we already had advised our clients and still advising them to create a proper balance.

They should come out of the so called defensives which are now getting into overvalued zones and get into some rate sensitives. It is time that one gets into some rate sensitives like autos, real estate or infrastructure where valuations are cheap. So, it is the right time to rebalance portfolio and align it with next performing sectors.

Q: We saw an 8% fall in Infosys yesterday. Do you think that it is tempting enough to enter or nibble into as well?

A: No, I don’t think so. Infosys in the last four-five quarters has had this history of getting over expectation because of good performance. But, the stock is now out of the radar of a lot of investors.

We always prefer TCS over Infosys. But, IT would be under some pressure for some time. There are other sectors which are quite ridiculously valued, so IT should at least be avoided for the time being.

Q: How do you expect the market to pan out up until the budget or even in the first half? Do you think that we go to 5,300? These are realistic levels for this quarter?

A: I think 5,300 would be a little too much seeing the circumstances that we are into. I think 5,100 seems to be a little bit of a probability. Overall we can see a little bit of more participation coming in from a lot of category of investors in the broader markets. That is driving a lot of stock specific movements.

So, it will be prudent more to be stock specific than to be market specific for a period of next three months. There will be a lull because there won’t be any reforms as such. Government would be preparing for the elections and budget. A stock specific activity will be witnessed in this result season or the earning season.

Q: What will be those stocks that are on your radar? What are you all bullish on stock specific?

A: When we experience a rate cut sooner than later, we feel that rate sensitives like real estate stocks - HDIL , Indiabulls Real Estate and Oberoi Realty which have low debt on books and which are substantially trading below their NAVs could do good.

There is substantial upside available in these stocks for trading as well as I guess investment horizon as well. Infrastructure stocks like Lanco Infra or IVRCL which are available at around 0.5-0.6 their book values, could be looked into for a medium-term horizon.

Q: For this earnings season in specific any sort of trading ideas that you would recommend in terms of possible upside or surprises from the earnings front?

A: We do like some individual stocks. Raymond comes to the mind immediately. The company is doing well. The last time also it came up with fantastic set of numbers.

It is a good play of retail as well as textile plus a story of land bank with it. So select stories like a Raymond, Apollo Hospitals and NIIT which is out of the broader market, could be looked into if one is not looking at index.