PN Vijay's sector/stock picks post Q3 earnings

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PN Vijay's sector/stock picks post Q3 earnings

In an interview with CNBC-TV18, Portfolio Manager PN Vijay spoke about his reading of the market and his outlook.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS F&C Investments' must-haves for your portfolio Fundamentals to get worse, enter mkt at 4K: Sampriti Cap How to play infra, telecom sectors post Q3 earnings? 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

In an interview with CNBC-TV18, Portfolio Manager PN Vijay spoke about his reading of the market and his outlook.

Below is a verbatim transcript of the interview. Also watch the video.

Q: Last couple of days has been a bit scary but do you think it is looking like a pre-budget correction or you wouldn't be worried about it?

A: I am quite worried about what has been happening last 10 days. The Chinese liquidity problem was sort of expected because we are all expecting some sort of rollback and tightening right across the globe during the year. It is question of when not whether. So that the market could assimilate but the latest proposals from President Obama are a bit shocking because, true, he had been handed down a surprising defeat, so he had to turn a populist a bit like a Mayawati or Deve Gowda. But even then some of the proposals he unveiled with could prove very bad for global equity flows.

That is something which could be a fairly serious threat to the global bull markets, which we are seeing last few months. Though there are people who would say that the Bernanke confirmation etc and his throwing his weight behind Bernanke shows that is more for the galleries and he is not going to go through another additional Glass Steagel so fast.

But the very fact that the Wall Street has to close proprietary books, could impact FIIs flows. From that point of view, the markets fell for the right reasons. So as it happens, the short sellers took advantage of that and beat every thing down. We are into a bit of a cloud as be go before the budget and let us see how this week pans out - it is going to be very important.

Q: We have all almost fallen inline though through last week - about a 4% cut in our market and theirs. Could it get worse for us you think?

A: India still remains some sort of a great place to invest, especially after the Q3 results have shown that corporate India is managing extremely well except for an odd Larsen & Toubro. Corporate India's growth has been in-line with the high PE the market has been paying last few months. India does have a large domestic investor base, insurance companies, the domestic mutual funds, a huge retail base etc. So to that extent we have fallen with global market one could call it knee-jerk because if you see through 2009, we went up 85%, Wall Street went up 25% the MSCI Global went up 32%.

We clearly started away from the pack right through the year. So India would remain a more interesting emerging market or market. However, we do get caught in sentiment driven corrections and we are seeing surely now.

Q: What about the space you just alluded to - infrastructure? Larsen was disappointing, Punj Lloyd was disappointing. How would you approach that space because it's quite influential?

A: I am basically contrarian because I am slightly longer-term in my outlook, at least six-months upwards. The way I see it, infrastructure took a big hit during 2008 because of high commodity prices and high interest rates and lack of government orders. All that's changed.

Why L&T of the world did reported disappointing results because only Punj Lloyd has got the legacy of that Simon Carves?

It's because the government hasn't gone through with so many of the orders they have been talking about. If you see the National Highways Authority of India's (NHAI) orders - Kamal Nath has been talking about 25 km a day but we are still running at about 6 km a day. The ultra mega power plant - the tendering is just getting completed.

So government's about 7-8 months behind its talk in the walk so that is affecting L&T, which is across the board which is into every segment. But in 2010 the orders will flow through; there are clear signs that India will start spending big time in infrastructure.

So I wouldn't be so negative on L&T. But L&T's results show that infrastructure is taking its time to pickup its feet.

Q: In the near-term, how do you approach some of the high beta sectors like metals?

A: Metals we are getting a bit wary because normal conventional wisdom is that if liquidity gets sucked out of the global markets, commodities will generally be the first to be affected. Apart from that metal companies had a good run in India far more than what the London Metal Exchange (LME) prices would dictate.

So in the near-term at least the non-ferrous metals call for some caution. Steel is slightly different. Steel has a big domestic angle to it - auto, construction etc. But metals one has to be more cautious and probably go into other sectors - slightly lower beta sectors - where the prices have fallen a lot and valuations are again looking interesting.