See 5650-5700 by May end on good inflation news: PN Vijay

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See 5650-5700 by May end on good inflation news: PN Vijay

Portfolio Manager PN Vijay, in an interview on CNBC-TV18 spoke about his reading of the market. He also gave his views on the assembly election results which are scheduled to be declared on Friday and what impact the results could have on the market and investors.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » 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 BSE | NSE 01/01/70 Are Mutual Funds betting on ? Other Stocks in this news Rural Electrification Corporation | Coal India | Piramal Healthcare | SKS Microfinance | Oil and Natural Gas Corporation | Future Ventures India | Allied Digital Services |

Portfolio Manager PN Vijay, in an interview on CNBC-TV18 spoke about his reading of the market. He also gave his views on the assembly election results which are scheduled to be declared on Friday and what impact the results could have on the market and investors.

Below is a verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. For the complete details watch the accompanying videos.

Q: How are you feeling about the market now? Do you think it will be listless and sideways for a bit longer or do you see any triggers that can galvanize it?

A: It might be listless for a bit more time but knowing the Indian psychic we don't allow things to be listless too long. It may have to breakout one way or the other. The big fear has been inflation. We have lived through that fear right from November at more than 8% inflation. We have sort of come to terms with that. If we get one or two decent inflation numbers and if we had the IMF reaffirming India's growth at 8% yesterday, if we had some dent in inflation with the corporate results practically out of the way, we may see a resumption of the rally we had mid last year.

In short, I don't see the market falling precipitously from here for more than a couple of percentage points at the most. There could be an upside going forward if we have a decent monsoon and some reduction in inflation, even a cosmetic effect.

Q: How much can Delhi deliver for the market both in terms of a change in fuel prices, some kind of deregulation or indeed the results from the assembly elections?

A: Results from the assembly elections would be a very strong event because if, as the prognosis and we will get the exit polls later in the evening, if the Left Front looses both West Bengal and Kerala then that will be a game changer in Indian politics and that would give the Congress that much of moral impetus to go ahead with reforms and then probably move over to BJP to ask them to support some of the reforms like insurance hike, FDI, multi-brand retail and some of the headline policy measures.

One is looking forward to this event but events are events. They don't change the trend like interest rates or inflation or exchange rates. It could be that little thing that will make the people sitting on the fence to pick up the phone and buy some blue chips.

Q: What kind of cap do you think this market may work with for the rest of this series?

A: In March, we went up about slightly over 9%. In April we lost 1.5% of it though in the first 10 days we were very strong. Maybe ought to be good. We ended April at about 5,540 or so on the Nifty. We should end closer to 5,650-5,700 by the end of May with a little bit upward bias maybe if we get some good news on inflation.

Q: There is the PFC FPO opening. What's your sense of what one should do in the price band of Rs 193-203?

A: PFC is a good company. If people were to roll back to the REC FPO which is a similar financing of the power sector infrastructure, it did pretty well in the aftermarket unlike some of the other FPOs. There is a certain dearth of good IPOs in the market. People who mostly come through IPOs maybe feeling - what's happening, is there a dry up or something?

So from that point of view, PFC would attract that kind of attention. I don't think you will go too wrong in investing in a PFC follow-on offer, not like an NMDC or an HPC surely. One could put a little bit of long-term money into that issue.

Read: Power Finance follow on offer opens for subscription

Q: SKS Microfinance is now down more than 40% in the last seven days. How do you approach that stock?

A: That is a controversial stock. I was never a great proponent of that stock for two-three reasons, first being the interest rates and other factors which were very high. At some stage there was resistance from borrowers. Secondly, because in India, microfinance is done in a very large way already by nationalized banks. If you go into rural lending by nationalized banks which is very huge figure, it is really microfinance at low interest rate to self help groups with a somewhat high delinquency etc.

When SKS came in with its approach to microfinance it was not very novel. Lastly, I did not like the idea of personally SKS securitizing its assets to High Networth Individuals (HNIs) and passing on the risk to them which I think they were not fully aware of the risks. There was a bit of a corporate governance issue there.

All in all, I am not surprised that SKS has crashed like this. We need to reinvent that whole industry. The way it started, it started on the wrong foot. We need some very strong players getting in and giving some respectability to that industry.

Q: What did you make of the business change of Piramal Health , getting from pharmaceuticals into NBFCs. It did not go down well with the street yesterday but how would you approach it?

A: I am not so pessimistic because I have done work with the Piramal's. They were some of the earliest predators of the stock market. Starting from VIP they did so many things, they believe in an acquisition strategy. Recently they acquired a cash chest because they sold off their OTC formulations business and did an open offer.

Today, Piramal's are sitting with large cash. I really hope they don't go into NBFCs which right now is an industry with problems. They have got some core competence in the group like Life Sciences or VIP is a sort of consumer product. I hope they diversify into that but let us not write off guys like Piramal's. They are people with great imagination and risk taking capabilities.

Q: How do you approach a Coal India now after the fairly significant outperformance it has registered off late?

A: It is at best a hold at current levels. Whatever good news was there in coal prices has got into the price of the share and it could be held. Of course, coal is one natural resource which is not subject to the usual commodity cycles. It has much longer commodity cycles. To the extent the product price will remain stable but all the juice has got into the price. After the ministers meeting tomorrow, all the excitement in the oil and energy sector will shift to the oil sector.

Q: Between natural resources and metals, what would you pick?

A: Natural resources. Metals in my view are going to have headwinds in pricing as they go forward. In the last six months, copper and to some extent aluminum have seen a huge rise. The way China is slightly slowing down, I wouldn't say too much about it and the American and EU growth has been built into the price. I don't see any fantastic upside in base metals but energy and other natural resources could be very interesting indeed because the long-term story there is very good.