Speaking to CNBC-TV18, PN Vijay, Portfolio Manager said that he is apprehensive about the grey market premium involved in the Reliance Power IPO.

He feels that the markets are nicely poised. The domestic buyers - retail and institutional buyers are taking a positive view on the Indian scenario and this is good for the markets, he feels.

Excerpts from CNBC-TV18’s exclusive interview with PN Vijay:

Q: What’s the verdict on Reliance Power?

A: Reliance Power seems to be totally getting sold on the grey market premium. The voices of valuations etc. are totally lost; people back calculate from Rs 850-900.

For some reason it does not quote at Rs 850-900, but only at Rs 500. I am apprehensive about this issue at this price and especially at the grey market premium which everybody is doubting.   

Q: What’s the call on the market from here after what you have seen last week in terms of midcaps and smallcaps. Do you think things have stabilized there?

A: The market's nicely poised and I am seeing interesting trend in the market now. After quite some time, it is a domestic investment which is calling the shots. Domestic institutional and retail, the FIIs are nervous because they are taking global view; they are not as positive about global economy as we Indians are about the domestic economy.

So we are seeing FII flows being having their ups and down all over the world. But domestic investors, retail and institutions like insurance companies etc are taking more relaxed view and this is very good for the market and going forward, we will see this as a positive thing because domestically, the cues like lower interest rates and political stability are major positives.      

Q: What do you think will happen to the other power stocks around the Reliance Power issue and eventual listing because yesterday we did see a move up in all of them again? What do you think lies ahead for the non-Reliance power stocks?

A: Difficult to say today. But fortnight from now, I see strong buying in power stocks; they have severely underperformed the market in the last two months. Some investors or funds who have a certain allocation to power have moved out of the big power and T&D companies to be having the funds to be invest in Reliance issue. So I think the money will come back. And in my view power continues to be one of the strongest portions of the Indian economy driven rally.

Q: If you have to choose between these two capital stocks which one would you buy JP Associates and Punj Lloyd?

A: Both are good stocks; JP Associates, at this point in time because of the excitement availability in that stock. I have never seen a stock grow into such a major stock in the last two-three years and today the type of contracts they are sitting on, they already have the Taj Expressway and they are probably getting the Ganga Expressway today and all the demergers and all the activities - they seem to be at the centre of everything right now and it’s a great stock to buy for big gains.

Q: Would you buy either Apollo Tyres or Indian Hotels now?

A: I don’t have same level of optimism about these two stocks for different reasons. At this point in time though, I will go for Apollo Tyres because it’s been traditionally undervalued in this whole bull market. They have got a strong position in their industry; they have grown in a nice way and the market has been undervaluing the entire auto component industry including tyres for longtime. So if there is a move up this move is sustainable. So Apollo Tyres would be good for some time.     

Q: How would you approach Bharti at Rs 897?

A: Well, Bharti is a good company; it has seen a lot of bearishness because they have been at the wrong end of the stick on the spectrum issue.

But the core business is strong; they have a very strong footprint and I think it’s a premium company in the telecom sector, whichever way one looks at it. So at some stage, when people want an exposure into the telecom space, the first and obvious choice is Bharti. So on a long-term, I may be bullish on that stock.

Q: What do you think of the stock IDFC would you be invested, is it expensive or is the growth going to be explosive?

A: IDFC is a bit expensive compared to what it was 6 months or a year ago. But it's a mega financial powerhouse in the making. The moves that they have been making is just classic. Each of their moves in the last two years has been profitable. I think its a very good stock at any stage because the business model is so interesting.

Q: What do you do with a stock like PTC at Rs 160?

A: A bit guarded about it because right now we are looking at the power equipment company. There has been a bit of a lull in the power sector. So I think there are great buys in the power equipment transmission and distribution space rather than PTC. It’s right now a bit of a hold for us.

Q: Future Capital Holdings has got lost a bit in all this talk of Reliance Power but that’s getting some hefty subscription any thoughts on that IPO?

A: Unfortunately I am not optimistic about Future Capital Holdings after listing; sure in the present euphoria, it will bet subscribed because it’s a start-up. It’s making losses in its balance sheet and its just starting its business. Of course, the cake is in the future money which is retail lending but we all know its slight at risk and if one looks at any type of valuations, if you look at comparative companies like HDFC or Sundaram Finance, either from terms of price to book or ROCE (Return on capital employed), it's overpriced. So I don’t know. Biyanis are very smart people, but in finance companies, one has to look for value at some point in time and I am not too optimistic about listing price of that issue.         

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It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.

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