Kapoor sees politics as the biggest risk for the market, but is hopeful of the Nifty hitting 6100 and even 6300 because of the recent decline in gold and crude prices.
Vibhav Kapoor of IL&FS says the fall in prices of gold and crude has changed investor outlook on India. Kapoor says it is likely that the Nifty can hit 6100 near term. He even sees the index climbing to 6300 if the global environment is supportive. On the downside, Kapoor sees support for the Nifty in the 5350-5500 range.
Kapoor sees politics as the biggest risk for the market, given the developments over the last month since the time DMK withdrew its support to the UPA coalition. He expects the RBI to cut interest rates by 25 basis points at its policy review meeting on Friday.
On fourth quarter corporate earnings, Kapoor said he expects significant improvement in operating margins. He is not bullish on Unilever’s open offer for Hindustan Unilever and is advising investors to sell the stock at current levels.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What is your call in the near term, do you think the market will stall around these levels below 6000 or in this up move you see a lot of headroom?
A: Over the next three-four months I am quite reasonably bullish compared to what I was earlier. It is largely due to the fact that oil, commodity and gold prices have all really crashed in the last few weeks. That has substantially changed the position as far as India is concerned.
Both on the macro economic front where the current account deficit (CAD), fiscal deficit and even inflation would be helped by the fall in oil and commodity prices. Also at the corporate level where you will see a significant improvement in margins going forward. So, over the next two-three months the market should remain pretty strong.
Q: So you think there is a good chance that that 5500-5600 area for the Nifty will remain a base?
A: I would think so yes at least for the next few months.
Q: What is the upside, you think we will get to 6100-6200 or are you more aggressive with your upside targets?
A: In the immediate term about 6100 probably. Then depending on how the global situation pans out it could go up to 6300 over the next three-four months.
Q: What is the key risk to this market in your eyes now?
A: Politics, that is the big risk and these projections I am making are all subject to politics. As we go forward we know the politics is becoming murkier and murkier. Therefore as the elections come nearer one is going to see much more of this happening.
That is why I am saying I am bullish right now only for the next three-four months. After that the elections will start to cast a bigger shadow on the markets. Therefore one would be much more cautious after that time frame.
Q: How do you approach Hindustan Unilever ( HUL ) now after the recent development?
A: One should be just selling it out because you have got a fantastic price. It was a complete surprise. Targets for most of the analyst consensus fair price is Rs 475-460.
Q: Bharti Airtel results seem a bit lackluster. Would you own anything there in telecom?
A: I haven't clearly analysed them. They just came in this morning, but I think Bharti has of course a lot of issues on debt, on Africa. So, in addition to the Indian problems, which may be are sorting out themselves a little bit now as was evident by the Idea Cellular results.
There are some further issues here in respect of the high leverage and the foreign exchange and the Africa business which needs to be analysed much more deeply.
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