Market to trade better despite headwinds: Emkay

Below is the verbatim transcript of the interview. Also watch the accompanying video.

Q: In two days, we have seen almost 600 point damage in the Sensex. What’s your sense valuation wise or liquidity wise? Do you see any bottom for the market in the near-term? Do you think some more pain may continue?

A: Some pain is expected to continue. For the last one-and-a-half years, the rally has been largely driven by earnings growth and growth which kept surprising people. The RBI said that inflation is working its head up and their main priority is to slowdown this inflation growth.

At the cost of economic growth, they would be taking measures to cut inflation. If growth slows down, which is more likely as interest rates rise beyond a certain level, we would see more headwinds to the market.

Q: In that context, your investor conference is to showcase cement infrastructure and real estate sector. Won’t all three be hit if the cost of money will rise, as it looks set to rise?

A: The realty stocks have been beaten down a lot. There are some more headwinds on the realty sector. However, there are certain pockets within the realty space, where we feel there could be value or growth.

Some of the companies, which have a lease rental model like the Phoenix Mills , will do well. We are trying to pick out some of the companies, which have bumped out and have enough cash to sustain their growth phase for at least the next few years. These are the things that we have tried to put out in the realty space.

We have put out speaker sessions, where they will talk about each of the markets as to the behaviour for the investors to understand and what’s happening in the real estate market, both on the sales and pricing side.

In case of cement, we had seen a good bounce in the cement prices. We will see companies talk about the expected pricing to behave in future and how much have the cost increases been captured by. The cement sector performance has done well.

On the infrastructure side, a lot of people talk about the headwinds from the interest rate cycle. However, a lot of stocks have underperformed the markets. At certain point of time, there is a value which emerges.

Given the strength of some of the companies, which are coming in our conference, both from an earnings and valuation perspective, there are opportunities available within these spaces where one can invest.

We are trying to bring a balanced view by way of this infrastructure, to let the investor know about it and what some of the companies could offer opportunities for investment.

Q: What’s the view on the cement stocks? While the companies may be doing well, we have seen quite a bit of rollercoaster ride as far as some of these costs are concerned. ACC or Ambuja have given decent returns. It is not how the company is able to do, but how has it been doing as stocks, since these are commodity stocks. What kind of return do you expect over next one year or so?

A: Given that there are headwinds in this market, we will probably see a challenging year ahead for the Nifty indices. If they stay where they are, we might see an out-performance from these stocks.

Going into this season, this is probably the best season. The more test of time will come to see the pricing and supply side situation at that point of time, when the monsoons come in. However, that is sometime away. As of now, cement sectors looks to outperform the market.

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