Aug 07, 2008, 06.29 PM IST

Bullish on cap goods at current valuations: Sharekhan

Hemang Jani, Senior Vice President, Sharekhan, feels that at current valuation levels there are many stocks available for good valuation. He is bullish on capital goods, which he believes has got both - good results as well as the way the commodity prices have come off, it would do definitely a lot good to the sentiment

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Hemang Jani , Senior Vice President, Sharekhan , feels that at current valuation levels there are many stocks available for good valuation. He is bullish on capital goods, which he believes has got both - good results as well as the way the commodity prices have come off, it would do definitely a lot good to the sentiment.

Apart from capital goods, Jani is also bullish on some of the companies in the telecom space particularly Bharti which remains a remains our top pick. Moreover, he is also bullish on some of the other companies in the pharma space something like a Lupin Lab and Sun Pharma and some of the companies in the midcap space like Tata Chemicals, Shivani Oils and Crompton Greaves.

Excerpts from CNBC-TV18's exclusive interview with Hemang Jani:

Q: Do you think that if the Bharat Sanchar Nigam Ltd (BSNL) Initial Public Offer (IPO) is indeed announced, we could see some kind of interest moving away from listed telecom players?

A: More than the listed telecom companies, this would be taken positively from the reform perspective because we have been hearing a lot of noise in the market that one could see some kind of reforms happening. If one actually sees some progress on that front definitely it would do a lot good to a sentiment. So from that perspective it is looking positive.

Q: How are you the market at this point in time? Is one of the premises that the markets will be ranged between 12,500 and more than 15,000 or is it that the bottoms can still be tested?

A: We are in the process of settling down and there have been some positive triggers. The results have been by and large okay, there is a fair bit of progress on the monsoon front and even globally, the volatility has been coming down both in US and even in India. Though it might appear that markets are volatile if you look at the implied volatility in Nifty, it has actually come down. So there is a feeling that markets may consolidate. It is going to be difficult to make a case for a very strong upside having seen an upmove about 10%, but there is a feeling that in the next six months or so once inflation peaks out, one would see the markets consolidating and it is actually a time to buy on declines rather than trying to exit the market.

Q: We have come out of a very news intensive month in terms of result season, the policy meet etc. going forward into August and September where does the market draw its primary cues from?

A: The primary cues is definitely going to be how overall numbers look like and what is the overall take on the interest rate movement and inflation, particularly there is a consensus that you will see inflation peaking out by the end of the year and you will see actually numbers coming off beginning next year. So once you see that happening at the ground level definitely there is going to be a lot more comfort and one of the figures that people would be keenly watching out for is the FII flow because in the year, so far we have seen a huge amount of selling close to about USD 7 billion. So if you see some positive numbers coming out definitely it would do a lot more positive in terms of sentiment. So the market could consolidate in this range and depending upon how this event span out it will take the cues.

Q: You said that this range that the market is falling into should be used as a buy on dips kind of a range rather than a sell on rallies in that case what will you buy, would you proceed with an assumption that the interest rates is over that is one and what would you buy?

A: At current valuation level there are whole host of stocks, which are available at a good valuation. I am bullish on capital goods, which has got both - in terms of the good results as well as because of the way the commodity prices have come off it would do definitely a lot good to the sentiment. So capital goods is one sector, apart from some of the companies in the telecom space particularly Bharti actually came out with a good set of numbers and that remains our top pick. You could look at some of the other companies in the pharma space something like a Lupin Lab and Sun Pharma and some of the companies in the midcap space that we like are Tata Chemicals , Shivani Oils and Crompton Greaves these are some of the stocks that definitely one can look at buying.

Q: What have you made about the rally in sugar stocks so far? Are we currently at that turning point where production slows down and the prices start shooting up?

A: Both internationally and in the domestic market you would see the sugar prices going up in the next about 3-6 months. This has been a sector, which has seen a lot of pain over the last two years and once you see the prices firming up you could actually see the impact on the sentiment. Once you have some kind of an understanding with the sugarcane producers at about Rs 125 per quintal or so you could see some kind of a positive impact on the sentiment.

Disclosure:

It will be safe to presume that I personally and my company have interest in the stocks that we have talked about.