May series may get Indian mkt back into the game: PN Vijay

However, PN Vijay, Portfolio Manager says, May has the potential to be explosive, and take the Indian stock market back into the game, if a few things happen. “One, the Budget is passed in next ten days. Secondly, there is clarification on GAAR issue,” he asserts.

Also read: Start of May series to be volatile; build shorts, says Sukhani

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: It’s been so tepid and lack luster in April through earnings, what are you expecting in May?

A: The prognosis on the street is for a lacklustre May. But I feel May has the potential to be explosive, and take the Indian stock market back into the game, if a few things happen. One, the Budget has to be passed in next ten days. If there are clarifications on GAAR, switching the feelings of the FIIs that they will not be too badly affected, there will be a huge sentimental boost. The type of mindless selling would stop.

Secondly, I think there was a lack of awareness in the government how serious things were because they were just battling with Indian issues like food security and right to education. Now, they (people) have been rattled. Things are very bad. So, that’s affecting them in all the elections. Even in Punjab, they lost because of rising crisis and no job opportunities. So, it’s a do or die situation for them.

Last evening’s rush passing the 26% bill on private banks, which has been limbo for last three years, if that’s followed by a pension bill, you will find the BJP very supportive because BJP is now feeling that they could come to power in 2014. So, if they start looking like good boys and positive and not disrupting Parliament then they will go back to the electorate and say we are the decent guys.

This is the last chance Manmohan Singh has, this Budget. If he can get GAAR out of the way, if he can get a couple of financial bills across and push through civil aviation then the market may take it very kindly because there is no growth anywhere in the world. India could grow much faster because of its domestic consumption, high preponderance of services, lack of dependence on exports etc. So, we have the potential to come out of the woods very fast. But I am just hoping that the government will get its act together then we can get traders’ anxiety out of the way.

Q: How soon do you expect to hear something with regards to a fuel price hike? How would you approach that pocket?

A: Probably, the day after Parliament closes. The game plan is to give Mamata Banerjee a restructuring of her interest loan. She has been keeping on saying last three months along with here lieutenant Amit Mitra that she earns about Rs 22,000 crore a year from taxes and she spends Rs 22,000 crore  giving it back to the government on her interest. She has this legacy of 20 years of misrule as a communist. She has point there. We will get a petrol hike. We’ll probably get some amount of decontrol from diesel. But all that will happen after the MPs have gone back to their constituencies.

Q: How do you approach Petronet LNG ? The stock has lost close to 15% through the last week and the earnings themselves didn’t look too strong this time.

A: They had a throughput issue. Petronet LNG has also been suffering from the fact that it is sort of a gas company and to the extent that the government has been fiddling with the pricing etc. It turned out to be a negative. There is certain section of the investment community, mainly the FIIs who won't touch companies where the government has a power to change the P&L and balance sheet with a barge pole. But I think there is a lack of information.

To my mind, Petronet LNG is not subject to any regulatory environmental issues. It just transports gas and it’s a supply demand issue. I think their new facility in Cochin is getting operational. They had a shutdown also. So, at this stage Petronet LNG, could be a good long-term buy because the business model is excellent. They have their transmission in place. The management and balance sheet is very good. So, at this level, a beaten down level at some stage, Petronet LNG will be a very good long-term buy.

Q: What do you do with the telecom stocks? Idea results were pretty okay yesterday, but the stocks have been under a cloud because of all the regulatory issues. Would you use it as a contrarian to buy or stay away?

A: Sometime ago we talked about it. When Bharti went down below Rs 300, we all felt and chartists also agreed that it is a great case for bottom buying. Idea did go briefly below Rs 80. Now, these companies are at the centre of India’s fastest growing industry.

It is a demographic fact that mobiles will be used more and more for transmission of information and internet and all those things. So, as the broadband and other incomes become larger and larger and the plan vanilla calling becomes less because of their position and their existing presence, they will be at a great advantage. So, we do keep about 8-10% of our portfolios in these two companies.