Mkt 'going mad' after stocks with quality earnings: Agrawal

In an interview to CNBC-TV18 he said, "The market is rewarding handsomely wherever there is a good high quality earnings growth. Actually there are few good companies with strong earnings that the market is going mad after." This is why FMCG, pharma stocks are seeing good buying interest, Agrawal explains.

He adds further that the weak rupee will support IT. However, in the long run, Agrawal believes investors still prefer to invest in reality over equities.

Also read: Current rally may continue; buy on dips, says Credit Suisse

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee.

Q: There is a fuel price meeting this evening. What is the realistic expectation to go with?

A: These meetings have been cancelled many times. Nothing has come out. So, the expectations are very low.

Q: Is Rs 3 diesel price hike enough to excite the market, given that the under-recovery is Rs 19 now or do you think the market may still go up?

A: Anything done in the right direction is good. But the size of the problem, by the day, is becoming bigger. With crude at USD 116 per barrel and rupee at 55 to a dollar, the stress is completely on this sector.

Rs 3 would be very little. That shows how little they can do, if at all even this is pushed out. Now, we have a finance minister who understands these numbers. I am quite sure that this will be a good beginning. He will politically trade his way through for even higher rises in the days to come. But let us make a beginning, whether it is Rs 3 or Rs 4. Beginning is very important.

Q: How are you feeling about the market? The newsflow around us continues to be very glum, but market moves up everyday because of global liquidity. Are you feeling uncomfortable?

A: One of the good things about this market is that it is moving. Secondly, wherever there is a good high quality earnings growth, market is rewarding handsomely. There are few good companies with palatable earnings. The market is going mad after those stocks. Pharmaceutical pack or FMCG pack, anywhere you see quality earnings growth, you are getting a lot of buying interest. So, one should not be disappointed.

Q: Wipro has been a big outperformer in the last one month. Infosys has come back almost 20% from its recent lows. They have no earnings to talk about. Why have they gone up?

A: Infosys might have missed guidance. But if you go through the earnings statement of the last quarter, it was up by 34% year-on-year (YoY).

Q: So, for IT, have you started looking at YoY?

A: What I am saying is that it is not that there is no earnings growth. The stock has not performed in the last one year or so. When the rupee is very weak, quality of earnings is good, I think Rs 100-200 rise from bottom prices is not very unfair.