Easing oil prices to lead a change in valuations: Dalal

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Easing oil prices to lead a change in valuations: Dalal

Amit Dalal of Amit Nalin Securities says that oil prices will come down, and that will lead to a change in valuations. He is positive on banks, going forward. He also adds that volumes remain a concern because people still do not have confidence in the market.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Markets trading weak: Metal stocks drag No sign of a dip in market sentiment Follow the market,don't take contrarian calls: Anand Tandon 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 30/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Dr Reddys Laboratories | Hindalco Industries | Hindustan Petroleum Corporation | ITC | Ranbaxy Laboratories | Mahindra Ugine Steel Company | National Aluminium Company | Indian Oil Corporation | Tech Mahindra | Mahindra Forgings |

Q: You liked ITC for a while but there seems to be reports that are concerned about cigarette volumes, hotel rates peaking out, even the new business breaking even, would you still buy it at Rs 180?

A: It is expensive now, no doubt about it, but so are the three spaces, which were never expensive before- engineering, technology and FMCG. And FMCG perhaps was never valued the way it is right now. But given the fact that we have GDP growth, and higher penetration in the rural economy, if one takes a medium term call on this company, they are bound to benefit. It has perhaps less risk on pricing from competition than perhaps another type of FMCG company. I would be a little cautious on investing right now; maybe a trading call, and you would get Rs 20 out of it. But on every huge fall in the market, I remain a fan of ITC as a purchaser.

A: They have more than given a fair share of appreciation, considering the uncertainties that will still remain. Even if oil prices fall, we do not know what will happen to the full losses that have accumulated or the bond, which has been issued, and how long will they be on the books of these companies. So for the time being, these companies are fairly well valued. I think out of all three, IOC gives tremendous value, irrespective of change in prices of oil. At every fall, IOC remains a good buy.

A: They have definitely identified one more space that they would like to develop their business in, and that is auto components. They have bought over the forging unit, and they also have Mahindra Ugine . That group has its strategy and ability to develop whatever it takes and move ahead. Over a period of time, I would remain invested in both the new listings as well as Mahindra Automotive Steel . I think that group is one that knows how to focus and develop businesses.

Q: What do you do with this whole pharmaceuticals pack now, in terms of the news flows that have been happening, and the performance that one saw in the last quarter?

A: I am not a big fan of any company, which has made huge global acquisitions in the last one year. Though, given the fact that they haven't performed at all, if the market is going to do well in the next month, I am sure these companies, whether it is Ranbaxy or Dr Reddy , will also see interest coming in and there will be an upsurge.

But I truly believe that you have to have some very large consolidation taking place in market capitalization when companies have gone into such large capex phase and the acquisitions that they have made and have truly moved their balance sheets into a very large capex cycle. I think you will not see the kind of profitability that you did in the past from these companies for the next one or two years. 

IOC is the only one, which we talked about directly over here.