Q: You think Aurobindo Pharma could be one of those hot stocks in 2007. Why do you like that story? What makes you bullish?

Adrian Mowat: I am going to speak like a strategist and I am going to make initial comments about the stocks we put forward. I am very anxious that the top four ideas that we have in India are generally got valuations of low 20 to 35 times earnings and I think this is just illustrative of how difficult it is to find stock ideas that have got reasonable valuations within the Indian context.

If we take pharma stock first of all we got very rapid earnings growth and I think that’s what’s going to allow this stock to trade at a reasonable premium to the market. If they continue the current growth rates then the premium to the market should expand.

Q: Fundamentally what attracts you about Aurobindo Pharma’s business?

Adrian Mowat: It’s the pace of growth that attracts us but again its fascinating that we have come out with relatively small cap pharma stocks rather than some of the mega caps such as Dr Reddy’s or Ranbaxy which would be easier for major funds to buy.

Q: You like HPCL - it played out as a bit of contrarian play because while crude was falling HPCL, BPCL gave you some nice material rallies but it fizzled out. Are you confident that it can swim against the tide of government policy this year?

Raamdeo Agrawal: HP’s valuations are far more attractive where the book value is about Rs 9000 crore and it will become 10,000 crore in the current year. The total net worth of the company at that appreciated book value and the stock is available at about 8500-9000 crore just about a little lower than current year’s expected book value. So my sense is that you cannot lose money if you buy it. I think it has lost about 15-17% even in 2006. 2007 has to be somewhat better for them. I mean if by chance the policy is come on their way, the stock can really rally big time.

Q: If crude continues to hover around that USD 60 mark, what is your assessment of fair value for HPCL stock?

Raamdeo Agrawal: Fair value doesn’t change even if oil prices goes to about USD 67-68. If you have a profile of about three-five years, I am quite sure that not only the policy hurdles will be overcome but even oil price will be much more reasonable during this period.

Q: You have chosen an interesting sector, tyres, and you like Ceat in that. What attracts you about the sector and about Ceat particularly?

Shankar Sharma:  We like the entire space. So its not really focused on one company but within the context of Ceat tyres obviously we are looking at a very big strong macro boom on the automobile side and the problem with the sector has been higher rubber prices and we see that stabilising if not falling altogether and that is a clear boom for these companies.

The threat of Chinese imports is there but not to the extent as originally envisaged. So overall we think that the space looks interesting and within that space Ceat definitely looks very interesting.

Q: What kind of fair value estimates would you have on stocks like Ceat and would you have any concerns, which might change your view on the stock this year?

Shankar Sharma: We are not going to be talking about target prices and fair value ranges because we are constrained by our own compliance. But the fact of the matter is that I won’t be surprised if stocks such as these give you a certain return in excess of market returns. Hence you could look at 25-30% compounding, perhaps more if the markets are truly bullish over the next couple of years. The concern is of course that traditionally it does not have the reputation of being the best-managed company in the space as the crown belonged to MRF. But we think that there has been enough change within the managements. So coupled with a favourable cycle the real estate and other things put together I think you are looking at market beating returns from hereon on this kind of stock.

Q: Indian Hotels - what do you like about those technicals and where could that stock be heading you think?

Atul Suri: Indian Hotels is a long-term story. In fact in 2006, it has broken out almost of a ten year high; the last high it had made was around 1993, so it is very nice to see stocks which have these very long-term bottoming formations and break outs.

Indian Hotels can also be a very lazy stock with very low volumes and lot of disinterest. But suddenly there is a build up of volumes, which is very positive. After it broke out of Rs 90 levels, the stock ran up to Rs 160 and again came back and tested its break out levels of Rs 90. This acts is a confirmation of a good and solid break out. I really feel that going ahead for clients or for investors who have some patience if you are able to pick this stock on days of panic at around Rs 120 or thereabout I think in a year or so we should see targets of Rs 220.