SENSEX NIFTY
Apr 22, 2013, 12.52 PM IST | Source: CNBC-TV18

Prefer Bank Nifty to banks; Infy a trading bet: Dimensions

an interview with CNBC-TV18, he says buying the banking index (Bank Nifty) makes more sense than buying individual bank stocks. Punjab National Bank is one PSU banks Srivastava is bullish on.

Beleaguered state-owned banks could surprise on the upside in the April-June quarter, feels Ajay Srivastava, chief executive officer, Dimensions Consulting. In an interview with CNBC-TV18, he says buying the banking index (Bank Nifty) makes more sense than buying individual bank stocks. Punjab National Bank is one PSU banks Srivastava is bullish on.

He says he will buy Infosys ahead of the first quarter (April-June)earnings because the stock has been beaten down below its intrinsic value. However, he is not certain if he would want to keep it as a long term holding in his portfolio.

Metals and oil marketing are the other two segments that Srivastava is bullish on. He says market expectations from the government have reduced considerably because of the ongoing political uncertainty.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: We have had a fairly sharp pullback for ourselves. Do you get the sense that there is more for the market in this current momentum or is the rally done?

A: I don’t think rally is done. One can actually throw a dart today and most likely will come up with a winner. At least the price will go up by the end of the day. So, I think the rally is there for some time at least because it’s a cumulative impact. There is a lot of negativity and of course the biggest positive macro points, government fiscal deficit getting under control.

So, lot of positives coming together at this point of time. Also the fact that the market was under owned in the large measures, there were lots of shorts, lots of people sitting on the sidelines. So, in the cumulative impact, I would say is bordering on euphoria rather than a rally.

Q: What is your own observation of the sharp crack in gold and crude? The observation seems to be that tactically it generally points to a correction or a come off on other riskier assets as well when things fall this sharply in the commodity universe.

A: Anecdotally and historically one is right. All the time the gold has cracked it has followed up with severe issues in the financial market . However, having said that the background has changed little bit to the fact that the central governments are more in control of the situation, they are more willing to intervene in the market compared to 2008 and 2009 at the point gold cracked.

So, one would tend to believe if there is a big issue coming in the market whether from Europe or America the central banks would intervene that is number one. Number two, the financial markets have cracked, the physical markets are not cracking and that is the interesting situation out there. I do not know if many people know the fact that the Minerals and Metals Trading Corporation (MMTC) run out of gold in Delhi.

People were buying physical gold. The prices never went down. The banks were still setting at something like Rs 30,000 for a 10 gram coin. So, it is a dichotomy that financial markets are going in a different way, but the physical market is telling a story that the physical demand is just not getting satiated.

Q: Last week, what also aided sentiment was a good set of earnings that came in from the private sector banks. Would you put any incremental money into this space and if yes, which are the stocks that you would look at?

A: The first point is that you would tend to start to look at buying the index again because that has done the best compared to the individual stocks. It’s a given, the fact that private sector banks would do well, but we are banking that the March quarter results of nationalised bank would be lot better than most people expected.

So yes, you could run up a list of nationalised banks and say that the Union Bank, Bank of India, PNB, etc would do a better job compared to this. Safer would be to buy the index because that gives a flavour of both the markets with a very heavy weightage of private sector banks.

So, should one-two banks kind of give a bad result, you are safe on the count. We are saying rather than allocating money to the banking stocks individually, Bank Nifty is a better place to be than just individual banks. The only one we have individual positions apart from Bank Nifty is ICICI Bank and it is in a longer term position of ours.

Q: The other trigger perhaps could be that the Budget session recommences today and there are lots of important bills that are expected to be taken up. What is your expectation and secondly, what could move the needle of the market if it comes through?

A: Zero expectation. I don’t think market is looking at the political part of the deal to come give us anything great to come out. Even on food security count, it is largely negative in a manner of speaking that how much is the pressure on the fiscal in the next 12-18 months before the election comes in.

So, I don’t think the political class can at this point of time give anything positive. I think global markets can give us more positives. One already knows the agenda of the Budget session today, the 2G report and the issues with the women and the rape issue, etc. I don’t think economic agenda is on top of anybody’s mind, no matter what they say today.

One or two reform bills are not going to make a summer for us. Let the government stay away. We are doing fine at this point of time. I don’t think government can do much to get the demand going and that’s what people are ignoring.

The demand is crumbling in the market. People who are euphoric should understand that the next quarter results. Maybe even after that things are going to be absolutely horrible. Local demand has collapsed almost to a level we have not seen for a far. So, one side euphoria, one side demand, but I don’t think government legislative agenda can give a leg up to the demand in the short term.

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