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Jul 18, 2012, 02.12 PM IST
Ajay Srivastava, CEO of Dimensions Consulting, says that the strategy right now is to be sector-specific because there are several pockets outperforming the market.
After the fireworks of June, Indian equities have settled into a bit of a gloomy phase the past few weeks. Choppy behaviour has been a constant on both the indices, making it difficult for the market to post any strong gains.
In such a scenario, investors are wary of entering the market and prefer to sit out on the sidelines. However, Ajay Srivastava, CEO of Dimensions Consulting, says that the strategy right now is to be sector-specific because there are several pockets performing well.
“Rather than looking and worrying about the range of the market, one would tend to believe that if you focused on the right set of companies, the right sectors, we are looking at 5-7% return in a month on a broad portfolio,” he said in an interview to CNBC-TV18.
He further adds that it is the high debt companies, such as from the infrastructure space, that are underperforming and weighing down the index.
On the downside, however, Srivastava says the monsoon deficiency is a major adverse factor for the market. Due to the scarcity of rainfall in crop producing regions, Srivasatav says the government will have to provide relief to state government, and this will increase the fiscal deficit. “I think rough estimates are about Rs 40,000-50,000 crore of relief to all the state governments, so to my mind the market has understated the risk of a drought,” he said.
Due to this, and other policy hurdles, Srivastava says 5600 on the Nifty in the next few months is not very likely.
Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee.
Q: The market has fallen into a bit of a range. Do you expect this grind in a range to continue a whole lot longer?
A: Yes, but having said that the market is in a range, what we have seen in the last 60-90 days and in the last month as well is that there are several pockets of sectors which are doing pretty okay. So I think rather than looking and worrying about the range of the market, one would tend to believe that if you focused on the right set of companies, the right sectors, the returns are reasonable. One would not say very great returns, we are looking at 5-7% return in a month on a broad portfolio.
So there is a broad set of companies which are high debt companies, infrastructure companies which are underperforming and will continue to underperform. Leave them aside and focus on the set of companies where we are seeing reasonable performance, reasonable price appreciation. Therefore you have to really bifurcate the market in two portions - one which you don’t want to hear about and the second which you want to focus on. The one we don’t want to hear about is the one which is grinding the market and the one we want to focus on has done pretty nicely.
Q: What is the grapevine in Delhi telling you? What kind of policy triggers might come about in the next two-three weeks?
A: I don’t think anything is coming out in policy triggers because they are grappling with bigger issues. I think the drought is now a specter which is becoming real in the corridors in Delhi.
You have already seen the fiasco on the restructuring of the state electricity boards and the power electrical distribution companies. This was the big one which they were hoping to announce in the next 7-10 days, that all the states will sign and that will be one of the biggest policy measures announced from the government. But that’s not coming through. So the first big restructuring was electricity sector which is now kind of getting held back.
The only other thing left which we keep talking about is foreign direct investment in retail. Maybe that’s a panacea, I don’t know, but that may come through. But the big one, which was the electricity restructuring, is stuck now.
Q: What about the diesel price hike? Is it priced in by the market already or do you think that could spark off any kind of rally?
A: The rally will come only on the sentiment that the government has taken the first step to call it. What we are hearing here is that the diesel price hike is almost imminent and that everybody has approved it. The market will see a spike up of maybe 30-50 points, one doesn’t know.
We are kind of becoming addicted to such announcements to get the market going. Market will spark up, but I think the high-beta and the high leverage sectors will again come back. So it’s going to be a 48 hour rally for those sectors and then we are going to come back to where we are.
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