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Jul 12, 2012, 08.23 AM IST
TS Anantakrishnan, director, Prime Broking says, more than the global factors, the Nifty will be driven by local factors. "From a broad market perspective, we think the range will be between 5,100 and 5,500. But I think it's more stock specific. Within the same sector, there is huge divergence in terms of returns," he adds.
The Indian market gained around 9% in June. It seems like the market is in a bit of a breather mode in the past couple of days.
In an interview to CNBC-TV18, TS Anantakrishnan, director, Prime Broking says, more than the global factors, the Nifty will be driven by local factors. "From a broad market perspective, we think the range will be between 5,100 and 5,500. But I think it's more stock specific. Within the same sector, there is huge divergence in terms of returns," he adds.
Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Also watch the accompanying video.
Q: What do you think is the next trigger for the market?
A: The next obvious trigger is the ECB action; everybody is factoring in 25 bps. But more than the global factors, I think we will be driven by local factors like monsoon, whether the government will go ahead with diesel price hike or whether there will any announcement on GAAR regulations or FDI in aviation or in retail. So, those would be the triggers, besides the earning season.
In our view, if you go by last quarters earnings, you would see that the number of surprises, as far as earnings go, was the highest in the last eight quarters. So, we believe the analyst community has well factored in the reduced earnings expectations. Based on that, we think we would see further surprises in this quarter.
Q: Do you think this rally should have more legs?
A: From a broad market perspective, we think the range will be between 5,100 and 5,500. But I think it’s more stock specific. Within the same sector, there is huge divergence in terms of returns.
In the banking sector, we feel that the market is pricing in a huge number of NPAs; we may get a surprise on the upside. Midcap private banks may actually outperform far more than what everybody is expecting.
Q: What about IT? How are you positioned for that space?
A: In the largecap IT, the only company, which we are positively biased on, is TCS. We are waiting for Infosys results to look at what the guidance would be.
In the midcap IT, we like Persistent ant Systems. In Persistent, they have one large order from IBM recently; their margins have started to expand. If you look at last quarters results of midcap IT companies, they have done far better than large caps. So, niche, nimble players like Persistent and others are the once we are focused on. I think you will see an upside as far as many of these companies go.
As far as Infosys is concerned, people are seeing a slowdown. That slowdown will play out for probably another two quarters. You should probably see the same for Wipro and HCL Tech. But TCS may still meet its numbers and may surprise on the upside too.
Q: We are actually seeing some profit booking coming in on the likes of HUL and ITC in the past couple of trading sessions. What is your analysis of the consumption story at this point in time? What sort of allocation would you possibly recommend towards a couple of these defensives?
A: We are overweight the consumer staples; we were about 12% overweight above what the Nifty’s weightage is. We think, however, this notion that monsoon is not looking good and if the monsoon is not looking good, rural incomes would not rise and therefore that will affect many of these consumer plays. I think it’s too early to take that call, granted that many of these players are valued at their higher range, historical range. But we still like them. We think they are consistent in terms of their performance. Valuations are obviously not cheap. But in a macro environment where there is so much uncertainty as far as earnings go, I think they still fall into the play where we can actually stay invested. So, we are not too much perturbed as far as monsoon or the rural story goes.
May 21 2013, 13:56
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May 21 2013, 11:05
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