For smart retail investors, ICICI Direct's midcap picks

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For smart retail investors, ICICI Direct's midcap picks

Harendra Kumar, Head of Research at ICICI Direct talks about his midcap picks, which are Oriental Bank of Commerce, SpiceJet, Visa Steel, and Granules India, to CNBC-TV18. OBC has underperformed the banking index by 43% & Sensex by 36% in the past one year. SpiceJet has State-of-the-art tech Star Navigation, Russel Adams and Tech Log.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Expect return of 25-30% in Spicejet 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 Oriental Bank of Commerce | SpiceJet | Visa Steel |

Harendra Kumar , Head of Research at ICICI Direct talks about his midcap picks, to CNBC-TV18. His picks include Oriental Bank of Commerce, SpiceJet, Visa Steel, Granules India.

Q: Lets start off with something from the aviation space, you like SpiceJet - what's the call on the stock?

A: That will be one of the first airlines to breakeven operating levels. Net levels '09 is possible and we are expecting some incentives from the budget, going forward, which could improve things for the sector as a whole. Clearly the space over the next two years could look up and Spice Jet is simply the most attractive at this point of time, and not very over optimistic, but we are expecting a decent return of 25-30% for the next year. 

Q: What is the thought on the second month that you like is Visa Steel from the smallcap steel industry?

A: Steel enters a super cycle next year and huge amount of capex, largecap and smallcap companies that they are doing. Clearly from a very commodity players most of these companies are moving towards higher value added steel and Visa is a small player and it's doing 2x expansions, some delay in the expansion at this point of time. But going forward on replacement cost or the earnings that it is going to earn, it's topline and profit will be equal to its marketcap two-years down the line.

So clearly a value play plus a growth story and we are considering the market conditions as a whole where at 20,000 Index we need to look at companies that have not performed at the share price level. So some of these fit that bill as well.

Q: Oriental Bank of Commerce is another pick of yours?

A: There's a trend there, some of the stocks have not performed. The bank is turning around after GTB's merger and book size is improving. If interest rates turn they could see some significant gains on the treasury side.

So at one time its price to adjusted book value has some value left in the stock and decent upsides for the next year.

Q: Your last pick for the next year Granules . Why do you like the stock? Do you have a price target going on it?

A: Around Rs 150 is reasonable where the company is on aggressive expansion. Its expansion should take shape from the coming quarters and profit should look up from June, so around a waiting period of three-four months.

But its earnings should start growing robustly from hereon for this year and for next year, it's a June-ended company, backward integration plus forward integration. So margins should also look up. The stock has not done much in the last two-years, so it remains in the same marketcap of Rs 100-110 crores and with profits moving up I am sure the marketcap should start adjusting itself.

Q: You probably have got a good finger on the pulse of retail. How brisk has participation been this month? How actively have they been looking at the NFO's that are open?

A: NFO's are clearly a favourite with the retail investors and they have a very robust investment SIB formula, that we call it. So they invest and they exit and the trend has been that probably after a couple of months, they are in all of the stocks. That means they have become smarter, aware and they take their profits early. So overall they've made the money in this market.

Disclaimer:

It is safe to assume that my clients & I have investment interest in the stocks/sectors that have been spoken about.