Check out: HDFC Sec shares calls on Cairn, Rel Power, UBI

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Check out: HDFC Sec shares calls on Cairn, Rel Power, UBI

In an interview to CNBC-TV18, VK Sharma, Head Private Broking & Wealth Management at HDFC Securities shares his expert call on Cairn India, Reliance Power and Union Bank of India.

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Excerpts from Markets Midday 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

In an interview to CNBC-TV18, VK Sharma, Head Private Broking & Wealth Management at HDFC Securities shares his expert call on Cairn India , Reliance Power and Union Bank of India.

"Cairn is the best bet if somebody wants to invest in the oil and gas space. It is a hold on the stock, investors can accumulate up to levels up to Rs 275-280 but they need to have slightly nimble foot at it," he said. Further on, Reliance Power he said the stock has huge amount of execution risk. "Even it falls 50%, one should not be looking at Reliance Power," he added. He also sees more pain in Union Bank of India, until there is any interest rate cut.

Below is an edited transcript of VK Sharma's interview to CNBC-TV18. Also watch the accompanying video.

Q: What is your view on Cairn India?

A: Cairn is the best bet if somebody wants to invest in the oil and gas space. It is not only an insurance against rising crude but also against depreciating rupee because all its earnings are in terms of dollars and the expenditure what it takes is in terms of rupee. This is one of those companies which are going to do well in the coming quarter and the next quarter too. The settlement with ONGC clears the desk for the increase in production, so it currently has 125,000 bbl a day production and Bhagyam will go on into production in the next quarter.

So, you can add something like in the next two quarters, you could have an additional 50,000 balance coming from there and for the year 2013 you would have Aishwarya also going on stream. Hence, here is a Nifty company that has clear ramp-up production abilities and good management and as long as Cairn Energy is present in terms of holding in Cairn India, you should not worry about the management concerns.

It is a hold on the stock, investors can accumulate up to levels up to Rs 275-280 but they need to have slightly nimble foot at it. This is not a stock which will keep on going up, although there is a lot of comfort in holding. So, in case there is a possibility of seeing a level of Rs 350, one should book his profits at that point of time.

Q: What is your call on Reliance Power?

A: Reliance Power looks technically good, one will have to keep a stop loss at Rs 70 and if that stop loss gets triggered then the stock continues to be poor fundamental play. Although 900 mw of power has gone into stream but the risk which were there on the IPO time, they continue to still remain in the company whether huge amount of execution risk. On the other hand, you have a company like NTPC which is available at half the PE of what Reliance Power quotes at and with much more production on-stream in excess of 30,000 mw, whereas Reliance is still 900 mw and double the PE. So, huge amount of execution risk and even it falls 50%, one should not be looking at this particular stock.

Q: What are the stocks to watch out for in 2012?

A: 2012 will have opportunities to make huge amount of money. You should be ready to give the market some room to fall further. So, the ones who are able to time in terms of average out your purchases, I think it will be a good strategy and that strategy is best played by not going in for a stock but for the Nifty itself.

Since you cannot buy the Nifty, you can buy the Nifty Benchmark exchange traded schemes (BeES) and that is one ETF which you can fearlessly buy even if the markets were to fall for the whole of the year 2012. You will not punish yourself two-three years down the line when the market is up your portfolio would be up; you don't have to remember what you bought. S, for the small investors and for somebody to wants to buy at dips, Nifty ETF is the way to go.

Q: How would you approach Union Bank of India?

A: The bank stocks have to be held on for a full cycle and if at all the fruits are to be achieved, the stock is further going to go down and the need for rate cut has risen because the bank was not able to increase its credit offtake. Both in terms of deposits as well as advances, it has lost from the March 2011 levels, so there has been a de-growth in deposits and advances, which is not a good tale.

More importantly, the net NPAs are also rising and the fact that the company has exposure to sectors which are not doing well - power where it is 13%, power is 10% and metals it has 5%. Hence, there could be further slippages and the stock could further go down.

If one is willing to book his losses then Bank of Baroda is a better pick which is slightly better placed. However, the fact is all banks will go down during the time when the economy is not doing that well. Hence, from this perspective until the interest rates are cut, where one could go on to buy these stocks, until that point of time there is some more pain.