Q4 results won't suffice market expectations: Anand Rathi

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Devang Mehta, Anand Rathi Financial Services, in an interview with CNBC-TV18's Anuj Singh and Sonia Shenoy, spoke about his reading of the market and his outlook.

Below is the verbatim transcription of the interview. Also watch the accompanying video.

Q: How quickly has the sentiment changed? Ten days back, we were discussing whether 5200 will hold or not. Will we again make a move towards 6000 mark? What has changed in last 10 days?

A: It has been an extremely resilient rally by the market. The Foreign Institutional Investors (FIIs) have been the huge buyers. They almost bought Rs 4000 crore worth of equities in the last few days and this changed the entire scenario.

With Warren Buffet's visit to India and making a lot of positive comments and the macro scenario showing a lot of improvement, the core sector in the industry has been growing well.

We are seeing improved fundamentals everywhere. The midcaps has been participating in the rally in which the Nifty can get tired after 100-200 points from here and the midcaps and smallcaps can take the rally forward.

Q: Would you say it is a liquidity led rally, FII change in sentiment in part of FIIs?

A: A lot of valuations were becoming attractive at those rates of around 5300. The stocks in the Nifty were mouth-watering at some point. Probably, this is more of a liquidity led really combined with a little bit of fundamentals that the Indian economy has to offer.

Q: For April series, would buying a put option make sense? Of all this Euphoria, we have seen put prices come off significantly. If you are portfolio investors to hedge your positions or if you want to take a bet on market in April if the liquidity reverses, would it be a prudent strategy?

A: The April month would be more volatile than the current days. At the start of April, we would be having the Q4 results season. Last year same quarter, the results were excellent.

Probably on a higher base, the results won't suffice the market expectations. Buying a put in the April series would make a little bit of a sense.

Q: How much of a leg would you give this rally? Would you target the previous high of 6300? What would you buy in advance of possible continuation of this rally? Which sectors or stocks in the Nifty?

A: The chances of 6300 coming immediately seem quite slim. Probably in the next half of the year when the capex starts, we can see these levels coming. Currently, one has to balance themselves in the consumption as well as the investment theme.

We have been hearing from the industry stalwarts about growing at 17-18% for the next few years. Some sectors like Pharma, FMCG and IT could be the some good big boys of the market to do well.

Q: Do you expect Reliance to join the party?

A: Reliance is an attractive price to buy. We see a contradictory report coming in from the DGH as well as Reliance from last two-three weeks. The stocks have been laggard on that front. If one has a 2-2.5 year horizon, Reliance is a wonderful pick.

Q: Would it be natural if there is a liquidity rally that continues, there should be a little more of a bounce up in the broader markets or the midcaps space? The have not participated as much as the Sensex and Nifty. Today, it has been refreshingly different from the past several days where they underperformed the heavies. Does anything in the midcap space look attractive?

A: Right now, we have one thematic report on air-conditioners and refrigeration. For last few years, the April to June quarter is normally a very good quarter for the air-conditioning industry. Particularly the stocks like Voltas , Whirlpool and Bluestar do extremely well.

If we see historically, these stocks give returns in between 20-25% to 60-70% for individual stocks. This industry is doing really well.

The demand pick-up in the sales numbers of air-conditioners is also seen. If somebody has a shorter or medium term time horizon, he could very well buy a Bluestar and Voltas for a short-term of three-six months' perspective.

Q: The big deal has been in the paper industry. We have seen all the paper stocks hogging the limelight. Would you say that this cheer is warranted across the board? The stocks are rallying 15-20%. Do you think that it sets some valuations benchmark for the paper companies?

A: I heard a lot of comments made by BILT and other industry players. The industry was slightly undervalued, but this happening at astronomical prices augurs well for the industry forward.

The paper prices are also on an uptrend. Probably, it is good for the industry, but I don't like stocks to be bought at levels above 20-30%.

Q: The real estate sector has seen some stability off late. In spite of that the analysts say that one should stay away from the sector. What would be your sense? Would you go for Unitech , DLF or something like DB Realty where there has been a flow of bad news?

A: There can be a little bit of correction on the real estate prices. The top pick in this sector would be HDIL as it benefits a lot from the Mumbai real estate industry in transfer of development rights. It is not very expensively valued. HDIL would be a preferred pick if somebody wants to buy something in real estate.

Q: Do you prefer anything at all in the fertiliser space? It has been seeing a movement on expectations that urea will become MPS based. Likewise, is anything in the textile space up and about?

A: We do like Chambal Fertilisers and GSFC in the space fertilisers per se. Among the textiles, Arvind and Alok would be major beneficiaries in the spending as well as the improved fundamentals in the developed part of the world.

Q: Is there any exposure to the stocks you spoke about?

A: I do not have any personal exposure in the stocks that I talked about. We have recommended it to our clients and they might be holding them.