Nifty unlikely to hold 4600: Sampriti Capital

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Nifty unlikely to hold 4600: Sampriti Capital

In an interview with CNBC-TV18, Sandeep J Shah, Chief Executive Officer of Sampriti Capital, spoke about his market outlook.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Nifty tests 5150; Bharti, ICICI Bank, SAIL, Wipro gain Be cautious at higher levels: Nirmal Bang Nifty may correct up to 5106-5079: Angel 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 BSE | NSE 01/01/70 Are Mutual Funds betting on ? Other Stocks in this news ITC | Fortis Healthcare | Hindustan Unilever |

Q: What should be the fair price for this company? What kind of price you think it might gravitate to once the follow on closes?

A: Unless it was closer to Rs 200-250, I am not sure whether I would want to go there. The message that I would like to give is that you don't have to make money on everything that is out there. You need to make money out of things you understand and what makes sense to you. So unless I got it at those levels, I wouldn't really look at it but the problem is that it has size, it's not in F&O. If it was in futures, then the market would actually made sure that the stock gravitated towards it realistic price.

If you remember for years, Wipro used to trade at a huge discount to Infosys simply because the stock was so illiquid and there was no other choice besides Infosys. Similarly, if you want to buy an Iron Ore stock besides Sesa Goa, I see nothing available out there. So if the stock was traded in futures, then we would see the stock actually trade closer to its intrinsic value.

Q: Would you buy sugar stocks now after their recent collapse or you would stay away?

A: Absolutely no ways. You see sugar tends to have this two-three year cycle. I like to buy them when things are bad and when they are traded by discount of ED by displacement costs when people are saying that company or the underlying commodity is going to slow down. In November 2008 I had recommended commodity stocks and that's the time I would really like to buy them. Even from a trading perspective, I think there is a fair amount of risk because can you predict the monsoon with a 100% certainty or can you predict whether there is going to be pests which are going to destroy the product or not.

There are so many variables, so you need a higher margin of safety when you are dealing with commodity stocks and especially agricultural commodities because they are even more unpredictable. So I would stay clear of sugar.

Q: What do you think might trigger a break above that 5300 mark?

A: The government did something locally that helped the markets pullback and outperform the global markets from a narrow time frame. The sovereign debt crisis is not going to roll over. We are seeing the end of it. The dollar begins to stable and goes back to its longer term trend of its steady decline. I would look for an environment which is very difficult and where growth continues and there is no fear on inflation.

We have seen that in the EU, there are serious concerns of a double dip. Even though this recovery has been the weakest compared to all recoveries in history, we have still had a recovery. However, if growth can continue without any serious increase in inflation or interest rates, it could be the real mix which could take the market. In that sense, this is predicated more on global factors because government's ability to do a reform is extremely constricted.

We have seen that they have done absolutely nothing inspite of having a clear majority. One should also mention the fact that to pass the Bills in both houses of Parliament, they don't have the majority or the support.

To that extent, the Samajwadi Party and the RJD is no longer supporting the government and makes it more difficult for the government to push through legislation. Their own internal allies are not in favor of some of the Bills. So in this environment, the other thing could also be reform, but that seems to be least likely. This is the least thing that we could peg our hopes on at this stage.

Q: Any thoughts on Fortis ? It seems like they have done a large international deal.

A: The erstwhile Ranbaxy group, which is perhaps called the Religare group now, has very clearly identified the healthcare and financial services as their primary businesses that they want to operate in. They are pretty much trying to build in the healthcare and in the financial service business trying to build a global foot print like Ranbaxy had. So I haven't really looked at the details of the acquisitions and what are the reasons are, but there would be some amount of a technology transfer that they could benefit from. In terms of skilled manpower, India really has the best it can manage to offer.

So I suppose its really for systems and processes because otherwise given that there is still a huge market in India and unless they can build some efficiencies into this company, I am not really sure I would fully appreciate or understand the basis of the acquisition but not that I have looked at it in a greater detail.

Q: Would you buy either Hindustan Unilever or ITC at this price?

A: HUL could always become a little more interesting because if the market were to correct so there would be some gravitation towards. Given the fact that they are going in with they are finally looking to gain market share and cut prices, has got the market a little worried. So I would actually watch HUL a little closely and perhaps see if there is a sense because for five years they have destroyed this company. They have had fairly short term goals either the parent has been trying to milk the subsidiary and it was so important that they wanted short term gains or there have been concerns that the senior management had a real eye on higher postings overseas.

It has been a great company which has kind of put, not to the wilderness really, but it's been kind of been in a slow decay. So what I would really look forward to see is whether that's going to change now and whether they are going to finally build that business. The opportunity is huge. Some of the Indian FMCG companies are doing so well.