Buy tele, banking stocks; stay away from IT: ABN Amro

Q: How have you looked at the Bharti, Suzlon earnings and any serious disappointments?

A: Bharti's topline was inline with estimates. The margin pressure is a little more than expectations and the drop has continued. With the number of customers that are being added, the topline may continue. Margin pressure should stabilize at some point, especially the ARPU (Average Revenue Per User) number. Bharti may then see a good sustainable rally but till then it will remain in the broader range.

Q: What do you recommend clients as a buy or perhaps a hold?

A: The telecom space is still on the growth path, so that's where we have suggested clients to take some exposure. Reliance Communications or Bharti are god picks.

Q: Any other sectors and big numbers that you like, from the oil and gas space, banking sector, what are the other recommendations that you are giving out?

A: For the medium to long term perspective the strategy has remained on the domestically driven sectors, be it capital goods, banking, telecom, engineering, power equipments and infrastructure. The numbers have been better than expected within the banking sector. Going forward growth will continue. One should watch out for the quality of assets as liquidity is getting tighter in the last few weeks. There could be some impact going forward, the valuations are comfortable and growth should continue in banking sector.

In the capital goods, executions delay is one of the concerns so that should be positive. However, in the next one or two quarters, margin pressures could continue. Thereafter, with the lower raw material cost should benefit the capital goods industry. So from a medium to longer term perspective, domestically driven sectors still continue to be forwarders.

Q: Will there be some sectors or stocks that you will not touch at current levels because of questions over their future growth?

A: I do not have a startling negative view for any sector but there are certain trends that one should be cautious about. With US and Europe flowing down, the larger number of IT companies among the large top names that focus on the BFSI segment, could be under some pressure on the volume if outsourcing doesn't happen the way everyone is expecting. So that is one sector where there could be a possibility of pressure on volume growth because of the slowdown in the developed markets. There is not much of a concern about growth in the domestic market.