SENSEX NIFTY
Jul 09, 2013, 02.05 PM IST | Source: CNBC-TV18

Don't see rate cut now, stay with pvt banks: DSP BlackRock

Anup Maheshwari of DSP BlackRock expects private sector lender to perform better than their PSU peers. He remains wary of auto space in the absence of demand.

Anup Maheshwari

EVP & Head Equities & Corporate Strategy

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Anup Maheshwari, Executive Vice President and Head of Equities, DSP BlackRock Investment Managers repeated what most other analysts are saying that despite the severe weakness, India is better placed than other emerging markets.

While in conversation with Udayan Mukherjee and Mitali Mukherjee on CNBC-TV18, he said the interest rate will take time to correct, and the expectations of market on that front may remain unfulfilled for sometime. "Policy action towards rate reduction is unlikely to happen in the near term."

Also Read: A busy week for Asia's central banks

Defining moment for the market will come during elections. Until then the market will remain rangebound. Right now many stocks are trading below book value, Maheshwari said. "Market velocity is much lower than it was in early this year." The rift between private sector and public sector banks continues to stay wide, with the former performing better. He remains wary of auto space in the absence of demand. Lack of demand is ailing gold ETFs as well. In general, the gold space has been unde pressure all this while with significant redemption in gold funds.

Below is the edited transcript of his interview with CNBC-TV18:

Q: Are you feeling any more cheerful than the last time we spoke or does the news just keep getting worse?

A: The last time we spoke, one of the main criteria we were looking for the main variables was the interest rate trend in the markets and we were hoping that interest rates would head lower, which would clearly help equity markets eventually. Unfortunately, that seems to have got pushed back a little given the way the currency has moved. So it does look like it will be a slower correction in rates than we would have liked.

But nonetheless, we are quite comfortable with the improvement that we are beginning to see. Our sense is now over half of the market in any case is in sectors or in stocks where the pro-earnings growth is fairly decent and fairly consistent. Thanks to the outperformance of the stocks in any case. That lends a base earnings growth overall for the index, which is important. That allows the market to keep consolidating in this range and possibly move up at some stage.

Q: Is this cue within that average earnings that is disappointing though, even for the quarter we are getting into, it could be anywhere between minus 10 to plus 17 depending on which stock or sector you are looking at. Doesn’t that remain a poor earnings performance in terms of how narrow the dependence is on a couple of faces and how poorly the rest of the space is doing?

A: That still is a challenge. There is still fair amount of divergences in earnings performance. But I think we still are of the view that a lot of that is priced in. You have a number of stocks trading considerably below book value in the largecaps as well. All of that to us points to a phase where you get more comfortable that the next three-four years will see some fairly significant upsides on some of these names. All it requires is a small delta changes now.

The big question is what sort of changes do you need for this market to perform or how much negative news is getting priced in. Right now with all the negativity around, it does look like a fair amount of that is in the prices of some of these names. So it does present an opportunity. It is still early to call it any significant secular change but you do get the sense that over three-four years, there are some stocks that will clearly deliver a huge amount of return here.

Q: What about the ownership risk because despite all this bad news, the point that you are making about being priced in, FIIs have actually bought probably USD 65 billion of stocks in the last two and a half to three years and they have sold USD 2 billion over the last one month, does that remain overhang on a market which is so shallow?

A: Sitting in where we are, things look pretty bad to us on the ground. We have discussed this before. It looks pretty bad everywhere.

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