Capital goods will push markets up: Anand Rathi

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Sensex lacklustre; Ranbaxy, BPCL, Cipla, DLF, Larsen shine Find out: Why Brics Sec is bullish on small cement cos Expect USD 20-25 bn FII flow this year: Raamdeo Agrawal 10 cues you need to know before starting your trade Nifty ends above 5500: Where is it heading? 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

In a market that can be termed 'stock-specific', Rajan Malik, Director-PCG Advisory at Anand Rathi Financial Services said there would be opportunities in the market going forward and all stocks that continue to perform fundamentally will be rewarded price-wise. "While most people are looking at Reliance and the capital goods sector to take this market to a new level, we too continue to be bullish on the capital goods sector."

Below is a verbatim transcript. Also watch the accompanying video.

Q: Are you in buy mode against what the fundamentals are saying and because liquidity is dictating or do you think that there is good reason to buy?

A: You are probably looking at it from Nifty's angle. Stock specific moves have been pretty decent and the market seems to be rewarding performance. You would have seen that most of the stocks that have gone have performed well in the first quarter.

There will be sectoral changes and churns-that's what you are seeing. If you look at it from the angle of the Nifty probably you haven't moved up much but most stocks are up 10-20% in the last couple of days. There will be opportunities in this market going forward. All stocks that continue to perform fundamentally will be rewarded price-wise.

Q: So pick up stocks for us. Let's begin with the one that's in the news today or in the green today. Would you buy the cement stocks?

A: We have been looking at the cement stocks from sometime now. Our view has been that the supply overhang is not going to be as large as was originally anticipated to be. I think it was sometime last month around when we took a contrarian call. While we don't expect immediate results in terms of fundamental changes we do believe that things will not be as bad as the markets' perceive it to be and that's what is being reflected by the price line today.

Q: Would you have a couple of top picks in the cement space?

A: In terms of largecaps we will probably look at Ultratech , ACC and Ambuja in that order and we would look at Shree and Birla Corp in the midcap segment.

Q: Sectorally in this entire rally there was a time when autos, pharma and banks performed. Going forward which is the sector which you think will be leading the way?

A: Everybody is probably looking at Reliance and the capital goods sector to take this market to a new level. We will continue to be bullish on the capital goods sector. You have seen Larsen & Toubro (L&T) perform over the last two days. That's been a stock we have liked. We would like to see some of these stocks coming back into the limelight.

Q: What about the aviation stocks? We have seen Kingfisher and Jet soar for the past four-five days. Are you buying any of these?

A: We did buy Kingfisher and Jet at lower levels but we are out of it now. Ye, there has been a fundamental story there, in terms of the load factor increasing and maybe for example Kingfisher needing some money. There is fundamental news behind the sector. It's difficult to say if the stocks are fully valued at this point in time or not.

Q: Would you buy any of the Pharma stocks? Is Wockhardt still a buy or has it just priced itself out? Is there anything else in the Pharma space that's having a good day today?

A: Ranbaxy is something we have liked. Another stock that we have liked always is Jubilant Foodworks . It doesn't seem to have performed lately because of the industry's business, but that's a stock we continue to like.

Q: In the broader markets there have been many stories which have done well. As a side sectors, something like a textile or consumer durables which one would you be backing now? Any individual stories you like?

A: It's difficult to say which stock will start moving on which day. We would like to see sectors actually perform well or some ground reality changes, before we go and buy some of these sectors and that doesn't seem to be the case right now in the sectors that you have just mentioned.

Q: You said that in the broader markets valuation are not still so rich. It is only in the Nifty that the valuations are rich. So in the broader markets, is there any stock or any set of stocks that you are recommending as a house?

A: Across the board there are stocks in the midcap and some of the largecap segment we have been recommending. What is happening is you have got to now see maybe one quarter down the road people will start looking at FY12 results.

You are probably looking at 16 to 17 times FY11 earnings which are where the Nifty is today and about 14 to 15 times. We may not be nearing bubble levels so we may not be relatively as cheap as we were sometime back. But there seem to be any number of stocks that are trading in single digit multiples and growing at 20% to 25%.