Jul 25, 2013, 05.26 PM IST
Dilip Bhat says Gail has hit the bottom and may become a defensive buy for sometime to come. He suggests investing in the stock for a slightly longer term.
After ITC reported a net profit rise of 18 percent to Rs 1,891crore for the first quarter, Dilip Bhat, joint MD, Prabhudas Lilladher recommends buying the stock if it falls 7-8 percent lower from its current levels.
Giving his reaction to all the day's top results on CNBC-TV18, Bhat says, Gail has hit the bottom and may become a defensive buy for sometime to come. He suggests investing in the stock for a slightly longer term.
With regards to Bank Nifty, Bhat does not think that banks are done with. "At lower levels banks would become interesting sector to look at. So, I would wait for some more correction to happen and possibly pick and choose this particular sector,” he adds.
In case of Wipro that will post its earnings tomorrow, Bhat thinks that given the overall situation of the rupee depreciation which will help Wipro in the bottomline, but whatever changes they have made are slowly bearing fruits. He therefore, says on a long term basis Wipro would still qualify as a good candidate to invest in.
Below is the verbatim transcript of Dilip Bhat's interview on CNBC-TV18
Q: ITC down 5 percent, the management is able to maintain margins but the revenue decline has surprised. What is your view on the stock?
A: In the last two-three years, 80 percent of the incremental profit always comes from a very nominal increase in sales of cigarettes and that trend still continues but volume continues to disappoint as far as cigarettes are concerned. However, as far as other businesses are concerned whether its paper business or its hotel business, both of them have disappointed quite a bit and there is little hope that they will turnaround quickly.
Coming to fast moving consumer goods (FMCG) business, it has been as per the trend. Therefore, ITC continues to be a stock where one would still look at when to buy even if there is some kind of a correction, people will still look to buy, but the question is when. Maybe 7-8 percent lower, I would be a buyer in that.
Q: What would be your view on the oil and gas space especially after Gail's numbers?
A: This under recovery is something which not most of us have any hold on. There are 2-3 things happening, maybe the gas price hike is going to hit them but they are also increasing the overall capacity of the petrochemical business.
From next year onwards, if this under recovery really stops, net-net whatever they show in this year would be the bottom. So, this is what the market would be rightly discounting, that is a time when Gail would start showing a sustainable growth. If Reliance is able to step up its gas production, that will also help Gail. So, Gail has hit the bottom and it may become a defensive buy for sometime to come and possibly a good investment candidate over a slightly longer term.
Q: How are you approaching the next couple of months? Do you think the underperformance that the Bank Nifty has showcased in the last one month will continue?
A: The volatility is here to stay whether it is Bank Nifty or the overall index. Therefore, whatever RBI has taken, if the finance ministry believes they are short-term steps and will be temporary so it will lead to a lot of volatile price movements. So, things are stacked up against most of the banks particularly those private sector banks because the short-term rates will go up as the liquidity gets tightened. So, I would not think that banks are done with but at lower levels they would become interesting sector to look at. So, I would wait for some more correction to happen and possibly pick and choose this particular sector.
Nifty at life time highs; uptrend may soon face resistance as markets become overbought
THIS LETTER HAS BEEN BULLISH FOR MANY DAYS. WHILE THE LONG TERM TREND IS NOW UP, A CORRECTION MAY BE COMING SOON.
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