Satyam news positive but questions remain: Collins Stewart

Here is a verbatim transcript of Amit Khurana's exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: Where do you think Satyam's stock is headed from here?

A: That's the most difficult because the new board is taking some more logical steps of arranging for short-term money to run the company on a day-to-day basis. So that's a positive step. They have got a person at the helm of affairs now. So in terms of putting the right blocks into place, it's a right step now. But the most important questions remain to be answered, which was the more credible number of the balance sheet, on the revenue side, on the clients staying with the company. As we get along, more questions will get answered over a period of time and one will be in a position to take a call where the stock is headed. However, at this juncture, there are more questions to be answered and that's where things stand.

Q: Do you sense that a lot of trading interest might die out in Satyam's stock now?

A: It could and that's also a function of technical factors like the stock not being a part of the derivative segment and most of the institutions have walked out of the stock. It's been driven by day-to-day operators here and there. So it's difficult to take a call on the fundamental side.

It's more technical, it's more driven by the speculative interest and I would not rule out higher volatility considering that the state of events could lead to day in-day out kind of movements of the stock.

Q: What would you do with the two beaten down sectors? Do you sense any opportunity there or do you think they need to stabilise at even lower levels - autos and real estate?

A: We have maintained that prices have to come off in real estate pretty considerably - between 20-30% and that's the only scenario where we see the inventory clearing up over a period of time. We have maintained that one-to-one transactions are happening at discount rates as high as 20-30% and we are also seeing more formal announcements, more public announcements by some of the big real estate developers now coming out in the open and admitting price cuts.

The next signal we would look out for is a confidence emanating on the economy and the buyers then may come out and buy real estate. But, you got to give at least two-three quarters before we see the inventory clearing off and then only we will see some improvement on the numbers there.

Leaving alone the two wheeler space, we are fairly cautious on the commercial space. While we have seen some uptick in the last few weeks on the enquiries at least, but translating that into actual sales will have to wait till the month of March. The steps taken by the government are obviously positive but more could have been done, it could have been done faster, because it's a critical sector for the economy, for the vendors' space. So, March will be the critical month for autos.

I shall say we are less negative on the two wheelers space, because we believe discretionary spending on the rural income will be higher on the two wheeler space and we have the most important event on the Nano launch sometime in the month of March, that will give us a flavour as to how confident the consumers are at this time.        

Q: What's your expectation of how we might end up February? When we stepped into January everyone expected it to be a huge move up or down and then it was flat?

A: That's pretty difficult. I have been saying for quite sometime that we are in a range and for that me that range is between 2,600 and 3,100. One can keep having alternate bouts on the rally or on the downside. But, I still maintain my downward bias - whether that happens in the month or February or March - it is very difficult to say.  

Q: What are you backing from here for the next couple of months in terms of sectoral out performers?

A: Basically markets are in range, so we do not have any sectoral choices in particular. We see pressure on most of the sectors in particular, we have maintained a cautious outlook on IT services - leaving alone Infosys - most of the other stocks will be under pressure. We have a fairly negative view on the cement, considering that there is going to be a supply overhang in the next couple of quarters and earnings are clearly reflecting that in spite of the supply not being there, the prices are taking up pressure on the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margins.

Our sense is that financials could be one sector, where you could see the first signs of recovery. But there are concerns on the likely levels of NPAs (Non Performing Asset) in the March quarter and June quarter in particular and that's where most of the stocks which had started showing some signs in the December and early part of January have given way and they are not performing as per expectation.

So, we do not have any sectoral buys; we believe it's time to go bottom up, there are stocks and sectors which are trading at 0.2-0.3 times price to book, companies which have been around for considerable period of time and one just has to take individual bets here and there with a longer-term perspective or  two-three years timeframe. Other than that we are not keen buyers on the market right now; we believe it's a range bound market and just keep trading for 10-15% and the moment we get a signal on the economic environment improving, that's the time we would probably lookout for some long trades.