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Jun 30, 2011, 08.26 AM IST
The markets may have seen the bottom for a while, says Sandeep Rajani, Head-Equity Research, Vertex Securities Ltd. According to him, quality midcaps and smallcaps will see a big move very soon. He likes Esab India, Grindwell Norton and Ador Fontech.
In the big space, he sticks to domestic consumption story Britannia , HUL , and Marico . “If there is a slight correction in the commodities space, you will see a huge run up in their operating profits.”
Also read: Five stocks that brokerages recommend to buy
Below is the transcript of his interview with CNBC-TV18's Latha Venkatesh and Anuj Singhal. Also watch the accompanying videos.
Q: We have had a sharp rally after testing 5,200, it has been almost a 400 point Nifty rally that we have seen. Do you think the markets have bottomed out? Going forward, what is the trajectory that you are looking at?
A: We think that the markets may have seen the bottom for a while, particularly from the midcap and smallcap index perspective. Quality midcaps and smallcaps will see a big move very soon.
Q: Some of the negatives that we spoke about, when the market was at 5,200, are still very much with us, inflation, rate hike, and the inevitable pass down of fuel prices, where does the market go from here?
A: You are absolutely right. You have counted all the negative factors which have played out. But we personally think that they have been priced into the market. The biggest point, which one needs to consider, is that the ownership levels from the retail perspective has gone down to abysmal levels now. The holding pattern suggests that very strong hands have increased their stakes which is the right recipe for a pretty strong move going forward, particularly from the midcap and smallcap perspective.
Q: What you like in the midcap and smallcap space?
A: We would like to mention three-four stocks like Esab India, Grindwell Norton and Ador Fontech. They have delivered about more than 15% operating margin despite the ambient conditions. They have delivered more than 10% net margins and they are debt free. So, these are the kind of companies which will see huge run up, once the value picking starts.
Q: Esab India, what is the price target you have on this?
A: We would not like to mention targets. But if you look at the P/E, you will get a fair indication.
Q: Welspun Corp has just signed a deal with Apollo. Should an investor of Welspun Corp be pleased?
A: If you look at it from the valuation perspectives at which the deal has taken place, it is certainly positive. As far as cash flows into the company is concerned, we would like to study the deal little more. We would like to study the deal little more from the value perspective and valuation perspective, certainly the deal is pretty attractive one.
Q: Can you give us a word now on largecaps?
A: In the big space, we stick to our domestic consumption story Britannia, HUL, and Marico. If there is a slight correction in the commodities space, you will see a huge run up in their operating profits.
Q: Any disclosures for the stocks you mentioned?
A: Our clients and associates maybe holding the stocks, it will be fair to assume that.
Tags: Market, Nifty, Sensex, Sandeep Rajani, Vertex Securities Ltd, Esab India, Grindwell Norton, Ador Fontech
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