Mkt to see further 10% gains; bet on IT, banks: JRG Sec

But, with the Indian stock market posting nearly 15% gains for this year, higher than most its peers, doubts have started to seep in the market about the sustainability of this rally. Anand Tandon, CEO of JRG Securities, reassures investors that the gains will continue.

In an interview to CNBC-TV18, Tandon says that the market will give further 10% returns from current levels for this year itself. “I am not expecting any major policy action from the government, so I see another 10% returns. But if we do have certain kind of aggressive policy action, maybe there will be a sense of euphoria in the market and it could be higher than that,” he said.

In such a scenario, Tandon advises investors to bet on beaten down names. “I think the sectors that have no so far somewhat underperformed would be the areas that we would look for,” he said. Therefore, his top picks are banks, the IT space and healthcare.

However, because of their high valuations, Tandon asks investors to stay away from FMCGs and other defensives, even though they will give returns equal to the market.

Below is an edited transcript of his interview with Sonia Shenoy and Reema Tendulkar.

Q: Are you expecting the flow situation to continue from hereon? Where do you think it is coming from and how much do you think it could prop up the markets from here?

A: It is difficult to say where it has been coming from, but clearly the money is there, Even the domestic liquidity is much better than it was few weeks ago because of RBI’s action. So for now, I don’t think there is any major problem on the flow side.

As we have been maintaining, the market was pretty much pricing in most of the negatives. But not much positive is expected to appear to miraculously change the environment. So I don’t think there is much danger for the market in the immediate near term baring any major catastrophe in the overseas world. So on the whole, I would think the market continues to look reasonably positive.

Q: What have you made of the 6.87% inflation reading that we have got? Are we likely to see more of the sub-7% inflation reading or is this one is an aberration? Also, are you expecting to see a rate cut on the back of a lower than expected inflation print?

A: I think it’s too early to see whether or not it will change. I think it is already expected that you will get lower figure because of the high base but that said the latest RBI survey of households has again indicated that the expectations continue to remain at above 10% and the CPI also continues to remain above 10%. So with that kind of inflation figure at least in the consumer pocket, I think it will be difficult for the policymakers to argue for a rate cut.

Q: What do you think the returns could be from the equity market for the year? Do you think we will have to resign ourselves to a range for the next three-four months or do you think there are better returns in store?

A: We are probably another 10% from here till the end of this calendar. I do not see any reason why that should not happen. I am not expecting any major policy action from the government. So assuming other things remain the same, that’s where we will be.

But if we do have certain kind of aggressive policy action, maybe there will be a sense of euphoria in the market and it could be higher than that.