Markets may move higher by year-end: Motilal Oswal

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Markets may move higher by year-end: Motilal Oswal

The markets are likely to move higher by the end of this year, said, Rajat Rajgarhia, Head of Research at Motilal Oswal Securities. “The floor for Nifty may be at 4,600-4,700, which will chiefly be triggered by earnings and borrowings.”

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Structural ROE could drive excess returns: Credit Suisse Rangebound markets: What should investors do now? Retail investors still cautious about markets: Emkay 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 Nifty BSE | NSE 01/06/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Tata Steel | Tata Motors | Pipavav Defence and Offshore Engineering Company | Anant Raj Industries | HDFC Bank | Punjab National Bank | Jammu and Kashmir Bank | Yes Bank | Shriram Transport Finance Corporation |

Q: What is it that you are pencilling in terms of earnings performance for the next few quarters?

A: We currently are moulding in a 30% growth in earnings in FY11 over FY10. Some of the big drivers like Reliance , Tata Steel , Tata Motors , each of them are seeing a better momentum in January-February-March quarter. This quarter itself will be a high growth quarter purely from a base point of view but FY11 should be a better year.

One good thing here is that after the Budget, while specific companies may have seen downgrades in their estimates, largely because of minimum alternate tax (MAT) and some other changes, the growth in personal consumption that will be driven during the year, is going to increase the topline of several of these companies.

We remain confident about 30% earnings growth in FY11 which is an above target growth right now and I would think this number may have more probability of seeing further upgrade if the current business cycle remains.

Q: One of the companies you are profiling is Pipavav Shipyard and that's been very quiet and range bound since its initial public offer (IPO), since its listing but has seen some heightened activity over the last three-four sessions?

A: As far as business is concerned, they take time to settle in, orders may see delay. The management has been sounding positive, and the order book is looking better now. In the next couple of years, we will see revenue and profit numbers will look better than at the time of IPO.

The IPO also coincided with the downturn that we saw in markets. People are finding such names interesting.

Q: The real estate stock that you are profiling that you conference is Anant Raj Industries . What kind of interest are you seeing there and what differentiates it from other midcap real estate companies?

A: In real estate we have been positive on city centric focused plays while urban consumption is going to drive significant real estate demand over couple of years and that's got supported by the Budget announcement for lower tax rates for personal income tax players. Companies with concentrated land banks and balance sheets in comfortable position will do better.

Anant Raj did not face debt problems in 2008-09, NCR centric player. They have number of interesting projects lined up in next few quarters with trades at meaningful discount to NAV. In the midcap real estate space this is one name that looks very interesting.

Q: What about the banking space, you are showcasing many banks in the Motilal Conference there, which ones do you like and which ones do you see the highest interest in?

A: We selected the profile of the banks accordingly where we had one large private sector- HDFC Bank , one large PSU- Punjab National Bank (PNB), one old private sector- J&K Bank , one new private sector- Yes Bank and a non-banking financial company (NBFC)- Shriram Transport , so that each one of them can have their own view on how they are approaching this business.

Two very interesting things that we got to learn from most of these banks-each bank Chairman or CEO is guiding for stable interest rates in 2010, after maybe couple of spikes in March-April, which came like a surprise because most of these bank managements think that second half of CY10 may not see as big rise in rates as the markets are expecting.

Second, the credit growth which was supposed to happen in the first half of CY10, will be more gradual and not very high and first half of 2010 will see a bigger pick up in credit growth.

Overall, most of the financial guiding for good growth overall for FY11-FY12, right from HDFC, PNB, J&K, Yes Bank and Sriram Transport. Sriram Transport which did pretty well last year should see an even bigger earnings growth in FY11 after the capital raising that they have done. Yes Bank which recently completed their capital raising and has been growing pretty well, should continue to maintain growth momentum in coming quarters. So almost every financial is guiding well for growth in FY11.