Buy sugar, power stocks ahead: Tower Capital

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » 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 Nifty BSE | NSE 23/05/12 Are Mutual Funds betting on Nifty?

Sandeep Bharadwaj, CEO and Head - Equity Strategy, Tower Capital, said the top sector to trade ahead would be sugar and, to an extent, power. "International sugar prices will make 10- to 25-year highs in the months to come. One stock does stand out is Renuka Sugar primarily because it is port-based and it has the refining capacity for the raw sugar that can be imported. Globally, we are seeing a huge demand-supply deficit and that can not be prevented by any form of government polices," he said.

"Second, to a certain extent, the power sector. However, looking at the valuations: everything in that sector is fully priced. So I would struggle there."

Also read: Budget won't move mkt; buy education, irrigation: Kotak Sec  

Here is a verbatim transcript of Sandeep Bharadwaj's exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: How would you advise investors to go into this budget after having read the economic survey, after having gotten the manner in which the government has moved on fuel price - would you go heavy into this budget?

A: To answer your question first about the budget, we have advised our investors that the forthcoming budget will be a non event. If you look back, we have been on the path of liberalization for the past 17-18 years and all polices that we can possibly think of are already out and the government has already taken/will be taking a decision on those. There is nothing new that we can expect. So in our opinion it is non-event.

Look beyond the budget rather than just in the budget and what people are very worried about is the monsoon situation. So even if the economic survey that has come out, it is more of a history and people are looking at what happens now. We have seen what has happened in the streets of Delhi lately - people protesting because lack of power, lack of water.

Q: Could you then pin down specifics in the midcap side of the market, I know you don't want to talk stocks but where should you be if you wanted to be in the midcap part of the market? What are the two or three sectors that you have in mind - maximum momentum, maximum gains?

A: The one sector we have been the most bullish on during the last four months and continue to do so is sugar. International sugar prices will make 10- to 25-year highs in the months to come. One stock does stand out is Renuka Sugar primarily because it is port-based and it has the refining capacity for the raw sugar that can be imported. Globally, we are seeing a huge demand-supply deficit and that can not be prevented by any form of government polices.

Second, to a certain extent, the power sector. However, looking at the valuations: everything in that sector is fully priced. So I would struggle there.