Kotak Sec bullish on auto & banks; cautious on realty stks

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Kunj Bansal , Senior Vice-President - PMS, Kotak Securities  feels that if the market dips then one should buy the interest rate sensitive sectors because there is a incremental rise seen. He is bullish on automobiles and banks . However he is cautious on on realty .

Excerpts from CNBC-TV18's exclusive interview with Kunj Bansal:

Q: Is this resilience of the market, in a phase of very negative global performance in Asia and in the west giving you the impression that the worst is over, you were very bearish last time any reasons to change your thoughts?

A: What has happened is, over the last month or so the macro factors have clearly improved. We have seen oil price coming off significantly, we have gone through the phase of political uncertainty and now we are back to certainty, monsoon has significantly improved from then and now. So these three have been very comforting factors possibly part of the reason for the market rise. But now if we look at micro factors, it may not be the right word and today itself we have the numbers for the air flyers Month on Month (MoM) 5% decline, Year on Year (YoY) 13% decline.

If we compare it with the international scenario even now the problems in the subprime and the financial sectors particularly in the US is still not over. If we analyze the results of companies in detail, the larger companies have been possibly able to hold on to their foot and have been able to protect their growth, margins and others things. The midcap companies are clearly seeing the pressure so it is a mixed scenario. Also, what happens is we are optimist particularly in India and may be other places also it is sentiment driven, whenever there are positive things the markets, the players and we in general tend to keep aside in a way good, negative things and vice versa.

Q: On numbers - Do you expect that the markets will once again test or will form new bottoms in the next 6 months?

A: It is a difficult and more of a technical call. But that might happen if we have a scenario of very fast exit of money from the market possibly from FIIs even if it is from domestic, it generally does not happen. But if that happens from FIIs, which will be based on the international developments more, then yes otherwise may not be so.

Q: If that is your argument then it is quite ironical that we have seen midcaps actually outperforming over the last couple of weeks or so, if that is your argument, going forward there will there be lot of pain in the midcap stocks?

A: I don't know if I will be in a position to generalize but what I can add is that midcaps always follow largecaps, it was seen on July 16 where the bottom of the market was around 12,500 on the Sensex. So initially we had largecap running , then there was everybody's interest also and a follow up buying and whatever has got lagged in valuations, so we saw that interest in midcaps.

Q: What would you buy if you did get that dip of July 16?

A: What we would buy now is the interest rate sensitive sectors because we see that the incremental rise could be lesser or even be more. Moreover, inflaion is already at 13% and this comes from the fact that if we look at the number that gets released every week there is a revision of the previous numbers, so we are already at 13%.

Q: So within rate sensitives which one auto, banks or realty?

A: Automobiles will be our first preference and banks, on realty we will still be cautious.