Bullish on GMR Infra, IDFC, Tata Steel, Sterlite Ind: PINC

Moreover, he feels that maybe a longer-term bottom has been witnessed though one could see some kind of retraction. "The trend ,slowly and steadily has turned out in the upward direction. " Shenoy advices to pick deep-value stocks at battered up rates and start building a long-term portfolio.

His personal favourites are GMR Infrastructure, IDFC, Tata Steel and Sterlite Industries.

Excerpts from CNBC-TV18's exclusive interview with Sandeep Shenoy:

The market has been quite volatile at this point. What is your advice for investors? Would you have them pick stocks now? Do you think the worst is over and the near-term bottom has, at least, been seen?

A: There aren't any visible triggers for the markets to surge up at this juncture. But if you look at the rally that we have witnessed in the last few weeks, we will have some kind of a correction. If this correction holds through, we might see some extended sideways movement in the markets till maybe September, when quarterly results are out. Probably a longer-term bottom also has been made in the markets. So it all adds up to the story that yes, maybe a longer-term bottom has been witnessed though we could see some kind of retraction. The trend slowly and steadily has turned out in the upward direction. It's too early to try and predict when will that happen, but I guess we have already embarked on that journey.My advice would be to pick deep-value stocks at battered up rates and start building a long-term portfolio.  

Would you be picking up stocks in the midcap space in that case if this turns out be a stock-specific market? Is that what explains the general out-performance of the midcaps?

A: The general outperformance of the midcaps could be more due to technical reasons. We had every technical analyst saying that midcaps are going to lead the rally but what we need to keep in mind is - the balance sheets of largecap companies with multi Rs 100-crore cash flows per quarter are under strain. So per quarter kind of cash flow status of companies is going to be bad in days to come. Of course, this is not to belittle all the midcaps - you could have some kind of a real sharp scale-up happening in some of the midcap companies but those will be specific stories. The broader story could be in the largecaps - the stronger largecaps, because those would have the safety of balance sheets as well as scalability and depth of management.

The specific midcaps that you just spoke about - the ones with probably better balance sheets or better growth prospects, any sector-specific stocks that you have done and would advise investors?

A: Some of the companies, which have really exhibited volume growth in their operations, despite having compression in their EBIDTA, are going to be extreme value-for-money because of the operating leverage of the business model. You could go for something like Shree Cements , which has witnessed a strong correction over the last few months or Rain Commodities , which has an orthodox business-play. In the shipping sector, you've got Maharashtra Seamless - it has witnessed deep correction and the upward curve is what we see.

Rather than being sector-specific, we need to be case-specific. Within a sector, look for the operating leverage in the company's balance sheet and business model. I think it really makes a strong value-for-money proposition.

Why is LML moving up?

A: That stock has always traditionally moved up twice a year for the last six years now but still hasn't gone anywhere. So you will have to leave it at that.

Is there anything in the heavyweights that you're watching out for? Or will all of them be value picks when the markets slip?

A: Quite a few of them have a huge amount of support coming up and they are strong value picks even at current levels. I am bullish on  IDFC or a GMR Infrastructure . Their asset bases are moving up and we will have all the ratios - the P/B (price-to-book) for example - moving in favour of these companies and giving them some kind of safety. This is not to say that they're utterly safe but their safety nuts are something where the values really vector. These two would be my personal favourites, followed by players like Tata Steel and Sterlite Industries .

Disclosures:

Some of the metal stocks are our portfolio constituents. Also, some of the other stocks like Maharashtra Seamless and Rain Commodities could also be our portfolio constituents.