Balanced Budget-led rally coming to an end: Infina Fin

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Balanced Budget-led rally coming to an end: Infina Fin

In an interview with CNBC-TV18, R Venkat Subramanian, CIO of Infina Finance Pvt Ltd, spoke about his market outlook.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS 10-year yield seen between 8-8.05%: K Ramkumar Avinash Gorashekhar not positive on cement space Book partial profits in Hero Honda: Gorashekhar 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 BSE | NSE 01/01/70 Are Mutual Funds betting on ? Other Stocks in this news Steel Authority of India | State Bank of India | Reliance Industries | Tata Motors |

Q: You were talking about the natural resource guys. In that context, what would you do with the steel companies now?

A: The steel companies that have full security of raw materials would continue to benefit in this environment because if steel companies having to contract resources at the prices at which they are doing both iron ore and coking coal. The pressure would result in higher steel prices but only companies like SAIL and Tata Steel would benefit to some extent but not fully whereas companies like JSW and all that would suffer. So you need to be in these companies which have full raw material security.

Q: What about cement? We have seen some signs of life in midcap and largecap cement names, is it a seasonal blip or do you think things are turning?

A: I don't know whether there is enough data to suggest things are turning. But clearly that has been the biggest surprise for most analysts that there was a sort of near consensus that the supply will overwhelm demand and hence put pressure on prices that has not happened over a couple of seasons now. So I think you have to sort of assume that the demand situation is so strong that the supply is getting absorbed. Clearly, the strength in north based cement companies is much more pronounced than you can see in any other part of the country. So to that extent slightly second tier cement companies with exposure in the north like Birla Corp would be a better bet, whereas if you are looking for trading momentum, Ambuja still looks okay.

Q: What about this Bank of Rajasthan episode? What have you made of it after a long time a financial entity is involved?

A: I don't think anybody in the market would be completely shocked by this because there has always been for a long time uncomfortable feeling about the way that bank has been managed and the promoter's involvement etc. So I don't think it will do any serious damage to the confidence in the financial system. It was a bank that a lot of people had uncomfortable feelings about. So hopefully the Reserve Bank of India (RBI) audit will not throw up something that is very diabolical, but it is not shocking. So I would say that it is not a big surprise.

Q: What do you think, what might be a doable range for the rest of this series?

A: I think we are somewhat in the sort of top-end of the recent range and there isn't anything to suggest that we should simply breakout of this. As I said earlier the relief was more that the Budget was over and there was a freeze before that. Now, the headwinds are in terms of the supply of paper as well as the earnings expectations. We are moving into this year with a stiff 22% from the Sensex EPS which is in the face of rising cost on almost every input whether it is labour or capital or raw materials, it is going to be challenging year for companies to meet that 22-23% earnings growth. So I think the market will move in fits and starts as we see more evidence that companies are able to maintain their margins. So I think it will be a slow move and in that context this would be a sort of near-term top end of the range.