Invt staying away fearing rate hike: Sharekhan

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » 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 GSS Infotech BSE | NSE 01/06/12 Are Mutual Funds betting on GSS Infotech? Other Stocks in this news Indiabulls Securities | Dish TV |

Hemang Jani , Senior Vice-President, Sharekhan , said, investors are unwilling to commit funds as they are expecting RBI to hike CRR or interest rates. He feels investors should avoid interest rate sensitive sectors for now.

 

Excerpts from CNBC-TV18's exclusive interview with Hemang Jani:

 

Q: What are you making of today's session at this point?

 

A: We feel that the underperformance or weakness of our market is essentially coming from the fact that people are expecting some aggressive policy action by the government or regulatory authority because of the high inflation number. So, the focus at the moment is on liquidity and news flows and not so much on the fundamentals.

 

If at all RBI resorts to a CRR hike or if there is going to be some interest rate hike, then the entire earnings growth equation changes because people had factored in some kind of softening of interest rates in the second half. If that doesn't materialize, the earnings growth that we will be looking at could change. This is why people are not probably willing to commit funds at this point of time though there is a consensus that valuationwise we are reasonably priced.

 

Q: Suppose that rate hike comes, how would you play banks , real estate , and metals from there on?

 

A: If there is a CRR hike, then there may not be so much of an adverse impact on interest rates or the performance of the banks per se. If interest rates in the systems go up, it will be far more negative from the stock market point of view. This March quarter, banks will report about 10% kind of a growth, people were looking at about 14%, because of some concerns that have cropped in the last two months or so.

 

Without interest rate hikes, overall growth is going to be quite subdued. In fact, we are looking at negative growth in most auto stocks. The best thing is to kind of avoid interest rate sensitive sectors for now.

 

Q: What's the call on IT ahead of numbers?

 

A: The consensus is that there is going to be an overall guidance of about 25% on dollar terms from Infosys. Our own take is that growth is going to be slightly less about even 22% for FY09. In one of the recent conferences, Infosys' management had said there is some kind of a lag in their clients' IT spend etc. We think it is going to be a little subdued and even less than that. The market is expecting some kind of a negative surprise there.

 

Q: What are your thoughts on GSS America and Indiabulls Securities ?

 

A:  None of these stocks are in our coverage. So, I don't have any view there.

 

Q: What do you think about media as a sector? Is that a sector that you are bullish on?

 

A: Overall, media would continue to underperform though one will have to look at individual stocks. Of late, whatever interest we are seeing like Dish TV or a couple of stocks is because of the CAS implementation news that has come in the last one or two days. There is hope that you will see some progress. But overall, I don't think media as a sector will do well at least in the short run.