Nifty may rally to 6000-6200 in few months: Prime Sec

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS What is ICICI Pru betting on in this consolidating mkt? Mkts will not correct to 2008 levels: Brics Securities May see inflows from DIIs in second half of FY11: ENAM Sec Mkts to stay buoyant on strong eco data: Motilal Oswal AMC Emerging markets continue to be optimistic: Aberdeen ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 01/06/12 Are Mutual Funds betting on Nifty?

Q: What are you doing right now in terms of the sectors, which you spoke about, which are not participating like the oil and gas majors, Reliance and ONGC , it doesn't make sense to buy them or do you think they will continue to grind even lower even as other parts of the markets perform?

A: ONGC is a different call, but some of the other oil majors have done post whatever decontrol that we have seen, they have done reasonably well. They are trying making up for lost time as it were a percentage appreciation.

What is even more interesting is the discerning rally, the biggest enigma in the market will continue to be Reliance Industries, it has got everything going for it and yet there is no clarity as to what it wants to do with its cash. People hear shale gas, people hear of gas discoveries, people will talk about EIH , people will see everything else and on the stray Fridays when people have nothing to do they talk about Suzlon being bought over. So, if this kind of clarity or lack of it exists with Reliance Industries and the stock supports that speculation, if you will, and doesn't perform then I think what is going to happen is those stocks will continue to be sold into, while a lot of other stocks will continue to be bought.

Today, there is no-one is to argue the fact that Reliance maybe cheap at Rs 920 as indeed it was at Rs 1,030 or it might well be a cheaper at Rs 850. But I think the markets right now do not have time to pause and mull over things like this. They are getting into the clearer and more transparent spaces like State Bank of India and Tata Motors because they are seeing a turnaround and they love what they are seeing. So, sometimes simplicity pays. I think this is one of those times when simplicity of vision and the fact that the Tatas want to talk about a turnaround I helping them much more than anything else life has ever done.

Q: What about infra, what is plaguing that space? Forget Punj Lloyd , which has had a string of quarterly disasters, but even the other construction names, L&T is not doing anything special or BHEL , why such disenchantment for that space?

A: I think the market in its wisdom is pricing in the fact that most of these companies will need to raise capital and I think that is the real issue. I think infra will be the big paradox in the Indian markets, paradox because you need it and there are companies providing it and yet you need money to make that happen. So consideration and return on capital and considerations of how much equity needs to be raised, I think this is what is plaguing that space.

So, markets in their wisdom are pricing in equity issuances from all these companies at some point in time, maybe all of them are being painted in the same brush, BHEL has not had that kind of an equity issuance, but maybe in BHEL people maybe talking about the government reducing its stake. I believe this sector is being plagued by the specter of fund raising.

Q: What about consumption themes? We have seen many of them like Jubilant , VIP etc blow the lights out, even some of the smaller consumable durable players. You keep an eye on some of these names like Whirlpool , don't you?

A: Absolutely. In fact we have interest in some of these. We do talk stocks during the programme, so that disclaimer holds. I think the real thing is that some of these have had such blow out moves that you should see this as continuation of bull markets because they go to new highs after doing 4x-5x of their lows and stabilise here for some length of time before making the next move.

I think the markets have seen consumer theme play out. They continue to see it and yet that space is a competitive space. No mistake. You take any newspaper you talk about the big luggage measure, for instance, having sales of 50 -70% and yet consumption is driving that and driving prices down as well.

So maybe we need to sort of temper this space with some amount of moderation by saying prices can't keep going up volumes will. At least in the auto space a lot of the consumption seems to be hitting new highs, while capacity is just not keeping pace. It is true for all the majors, not true in the luggage space and some of the FMCG space things are doing exceptionally well.

So, I think all you need is to go into these malls once a week basis and understand. Not malls in South Mumbai, but malls in Thane and outside the city limits to know exactly where middle class India is spending money. I think it is no surprise that some of these names will continue to move forward because the wealth effect is peculating down the line, there is no question about it.

Q: Do you think sugar is ready for a move, it has created a base for long enough?

A: I think so. I think sugar has because it is the only sector, which unfortunately subsidies the government because there are enough sugar areas over the years that the government has not actually passed back on to the manufacturers. Now, they talk about subsidies etc. I think there is no running away from this. The time has come that the farmers must get a percentage of the realisation of sugar companies. So, we call it, in Brazil, the Corsicana formulae, but essentially in India it needs to be a 60-65% of end product prices must come through. That is the only way decontrol can happen. This does not need to be a holy cow. The farmers must realise that they are as much a part of sugar industry in terms of getting a percentage, with a balance 30-35% or 40% going towards payment of debt and helping companies expand.