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

Here is a verbatim transcript of an exclusive interview with R Venkat Subramanian on CNBC-TV18. Also watch the accompanying video.

Q: What are your thoughts on the NMDC price and whether it will excite institutional investors?

A: More than NMDC, I can think of two stocks where it will have an impact. One-it makes Steel Authority of India Ltd ( SAIL ) looks relatively cheap and it makes Sesa Goa looks a little expensive. Apart from these two listed stocks where there will be some impact because of NMDC pricing, NMDC price itself is still a bit of a tough range. I think Rs 250-275 range would have made it very attractive and at Rs 300 it is sort of neither here nor there.

So at Rs 300 or above Rs 300, the investment bankers would have tough job on their hands. Otherwise, the environment is extremely favourable for NMDC. The headline for iron ore and any kind of resource is so strong that generally there should be investor appetite. There maybe a little bit of churning from even some of the global mining companies that investors are holding into something like NMDC. So it is okay but not great kind of pricing.

Q: Would you put in a bid anyway because of the kind of wealth creation some of these natural resource stocks have shown?

A: They have shown wealth creation but we also have to remember that it is almost like 2007 in terms of the rush for raw materials from the manufacturing companies in that sector. So to that extent also, on the cyclical basis, it looks like almost near the peak that we have ever seen. on a current spot price basis and current earnings basis it may look attractive. You have to keep a view on what do you expect going forward. To that extent, it is not a bargain but on a relative basis, I would think that something like a SAIL is cheaper than NMDC. However, around Rs 300 it is worth giving a shot.

Q: How are you feeling about the market? It has had a good run post the Budget but seems to be slowing down again.

A: Couple of weeks before the Budget, there was almost a freeze in the market that everybody had stopped whether the buyers or sellers had gone into a kind of freeze mode. Once the Budget came out to be in line with expectations, there was a bit of a relief rally. The government did what IT companies have been doing in this country. They managed the expectation so well and delivered exactly what was expected of them. To that extent, the market got a chance to have a relief rally.

This is now coming to an end. It also fortunately for us coincided with some easing up concerns on the European debt crisis. While it has not been solved, there was a bit of positive news on that front. So I think that space has come to an end, The biggest headwind going forward would be the large issuance that is coming up from almost every Nifty component whether it is in the private sector or public sector. While companies like Reliance and Tata Motors are selling their stocks or their shareholders' stocks and Bharati has to raise money for its acquisition. On the public sector side, almost every large company whether it is SAIL, State Bank of India (SBI) or some of these companies, they have to raise money. Either the government is selling or they are raising money for themselves. This is definitely going to put some pressure on how much the Nifty can perform.

From here, the sentiment would remain positive and the key to sort of making money into the market would be to look for companies that are not required to raise capital but at the same time can participate in the uptick in the economy.

Q: Any thoughts on Tata Motors? It has been the surprise pack and just started past Rs 800. This morning as we start, we will have a big deal worth 5% shareholders churning out or selling out. What is the right way to look at it?

A: The recent quarter performance from Jaguar-LandRover (JLR) has been simply outstanding. Some of us who have been skeptical about how quickly that part of Tata Motors would turn around have been surprised by the strength of that turnaround. To that extent, the estimates have to go up. We have to assume that the company is doing well on the domestic and overseas front. In terms of shareholders selling, I am not sure whether this particular shareholder has sort of preempted the company because the company also would be looking to raise money at this kind of levels and with environment being favourable for them. Other than the fact if they have been looking to raise money and if the shareholder has come in ahead of them, it maybe slightly negative otherwise it is a bit of overhang for a few weeks maybe, but I don't think it involves any major negative development for the company.