Bad news priced in for Maruti; HUL can do wonders: Agrawal

"Worldwide also quality stocks are being pursued relentlessly; you see Apple making 600 billion plus kind of new high. Even here, all the good quality and size consumer stocks are making new highs every day. So my sense is that HUL fits into that thing where quality is there, now growth has come in and longevity in case was not in doubt. So this is a perfect stock at this juncture for moment chasing," he told CNBC-TV18 in an interview.

Meanwhile, Bharti Airtel continues to disappoint investors weighed down by a slew of downgrades. There is too much confusion and lack of understanding on what is happening in Africa, says Agrawal.

"We need to see how the management addresses the balance sheet issues and the upcoming telecom auction," he reiterated.

Further, he feels negative news is already priced in for Maruti Suzuki .

"As far as the current situation is concerned they have already gone through pain of labour trouble. The opportunity set for them is one of the most attractive in any part of the world because of the kind of positioning, products, customer loyalty, distribution and service network they have," he elaborated.

 Below is the edited transcript of the interview on CNBC-TV18.

Q: Bharti Airtel is down nearly 50% in the last 12 months. You have been an investor in the past out here. How disappointed are you? Are you still holding on to it?

A: No. There is total disappointment in the sense that in 10 years ago, in 2003, you saw a company coming up from loss and it became one of the most profitable companies. It became one amongst the top 3-4 market cap companies. It was third in 2006 and from there it has declined in an environment where telecom stocks worldwide are doing quite well. It’s a disappointment at this juncture. That is how the big game is played here.

Q: Are you going to buy it at Rs 250 or is there too much confusion in the environment for you to take that call?

A: There is too much confusion and lack of understanding on what is happening in Africa. The balance sheet has become highly leveraged at this juncture. The domestic scene is also not very clear what will be the outcome of the auction and then one is talking about eventual entry of Reliance. The kind of balance sheet they have to support with this new entry, it can create disruptive competition. 

So in that situation my understanding is very limited, particularly Africa business. So I would stay out at this juncture.

Q: Last time you were lamenting you have not so far found the courage to go out and buy Hindustan Unilever. Since we spoke, it has crossed Rs 500. Did you find the courage in the last few weeks to go out and make a buy?

A: I have not bought anything but I think this stock could do wonders. Worldwide also quality stocks are being pursued relentlessly; you see Apple making 600 billion plus kind of new high. Even here, all the good quality and size consumer stocks are making new highs every day. So my sense is that HUL fits into that thing where quality is there, now growth has come in and longevity in case was not in doubt. So this is a perfect stock at this juncture for moment chasing.

Q: What have you been making of this political noise in New Delhi? It is getting shriller with every passing day. Do you think the market will get the kind of policy action that is been looking for?

A: Till last week it was looking as if some things will happen. There was a change in finance ministry, so we thought that Chidambaram will do something. Also, the Securities and Exchange Board of India (SEBI) did a lot of changes, so we thought that things will start moving.

Something will definitely come out, it will not be complete paralysis, but it looks that it will be much lesser than what one initially thought. The confusion remains and it will end up somewhere in election or something like that.

Q: Crude has gone up to USD 116 per bbl now and we have not seen any pass-through, forget diesel but even in petrol. How do you reconcile all these things with a fiscal situation which is worsening and the threat of a downgrade which is looming?

A: It doesn’t make sense why things are not happening and why diesel prices not being raised. If vegetable prices can go up by 30-40% which is hitting the poorest of the poor then why diesel prices which are not being consumed by the poor is not being raised. It is dampening the entire environment of fiscal discipline and there are lots of other unintended consequences. So, I just cannot rationalize what is happening in Delhi.

Q: Is the market a bit ahead of itself on fundamentals given what is happening with crude, with politics, with macro or do you think prices are going up for justifiable reasons?

A: There are two things; one is that market is not in a bearish mode. This is not a market where good stocks are available cheap. Wherever there is clarity in earnings growth and management has been reasonable in the past, the markets have been more than fair to these stocks.

This is not a classical 2009 kind of breakdown of the market where even good stocks were available very cheap. It’s a very healthy market. If a company is performing you will get the reward for that. Whether it is a smallcap, midcap, largecap, wherever there is a quality performance, I have seen the stocks going up.