See Sensex touch 12K in 2009: Pashupati Advani

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Pashupati Advani of Advani OTC Dealers said the market will move up in 2009 at some point in time, which will be an opportunity to make money. "Currently we are in a trading range and feel that market will touch 12,000 on the Sensex in 2009. However, in worst case scenario market may test bottoms too."

 

According to Advani, there will be lot more action in debt-related stuff and warrants, and there will be incentives for people to be in capital-market instruments. "Thus, the gambit will shift from pure equities to equities plus warrants or convertible bonds, which will be more helpful."

 

Here is a verbatim transcript of the exclusive interview with Pashupati Advani on CNBC-TV18. Also watch the accompanying video.

Q: What do you think is the road ahead for 2009?

A: I think this year is going to be little more of what has started in 2008. But, actually there will be times during the year, where the markets will move up and therefore it will be an opportunity to make money. But, I see a lot more action in debt related stuff, there will be warrants and incentives for people to try and buy capital market instruments. And the gambit will shift from pure equities to equities plus warrants or convertible bonds, and things like that which will be more helpful.

 

Q: Two questions related, first do you think we put in a bottom into 2008 in October and secondly what kind of a broad range do you see the market in 2009?

 

A: At the moment, I think we are in the middle of the trading range. I think we will actually see 12,000 as well, but if there is some kind of an adverse condition or the world slows down more it is pretty ugly out there. Then therefore it could test the bottom and then go through them. But so far I don't think so.

 

Q: From the market's perspective what remains the biggest threat to your mind. Is it that earnings decelerate to an extent that the market has not expected or factored in or do you think we might also this year have to deal with the kind of global crisis, we had last year?

 

A: I have always been a believer that markets have been driven more by liquidity than by fundamentals and that is going to be the riding consideration this year also. We have seen stocks that are trading at ridiculously low P/Es, simply because we had hedge funds and large funds getting redemptions and wanting to get out of the stock. So, they had bought what they had thought were good stocks but when it came time to exit, there were no buyers and that is what we are going to see a lot more, I don't think it is done yet. And, I think redemptions are going to continue.

 

Q: What is the end game for this Satyam saga, how will it all end and what do you do as an investor now?

 

A: I think the institutional investors are going to try and find new management. It will be a little painful to remove people, but the incumbent promoters are trying to rally the staff and trying to use the staff as a deterrent for people to walk out. But, I think if you get a strong player, who has got a decent reputation to come in and give them some incentive, then it works for all parties concern.

 

Q: Do you stay on with the stock in the hope that it will happen?

 

A: I am one of those people that once you got bad management you try to walk. So, I would get out of it. If you wanted to be speculative, you could always buy the options and that is like a very speculative bet and that is what people should try and do.

 

Q: What do you do with real estate?

 

A: It has been tough for that sector and will continue to be tough as long as people are not getting money to buy flats. The government is trying to put some things in to allow the lower price loans to get a lower rate and therefore push the whole economy. But interest rates should be coming down that will probably get people extra-leverage but the thing is that banks are not willing to give long-term loans at a fixed rate. So if interest rate starts to go up for whatever reason maybe because of inflation then we will have a problem.

 

So it is going to be tough times for that whole sector and the biggest problem is that people are not going to be able to complete projects and that is going to have different effects for all sorts of people.

 

Q: How are you feeling about some of these commodity stocks this year especially the metal lot?

 

A: I was pretty bullish on commodities and therefore got a couple of slaps but on the flip side, there was actually one index stock that made money last year which was Levers. So, it is not like everything is done badly but yes going back to commodities - there is a slackness in demand which is going to be lower price, but, I don't think too much lower from here, because there is going to be need and certainly any agri-based commodity it is not going to be too far down and I am quite bullish about sugar.

 

Q: What makes you bullish on sugar going into 2009?

 

A: I think that all agri-based commodities - the world is going to eat a little less but not that much less and there is going to be demand also the refiners are going to have some ability to be able to pressure the producers.

 

As you go more and more towards the free economy and given that it is election year there will be very little tinkering with the policies. I think these companies are in for a good run also if you do the numbers worldwide, it looks like that 2009 is going to be little tight for sugar again.

 

Q: The other stock whose announcements the market didn't react very kindly to for a couple of days was JP Associates, how do you approach something like that?

 

A: JP Associates was a favourite of mine until they started doing all these financial engineering stunts, which are becoming the sort of norm among Indian promoters and it is not a very healthy sign. Tough call because they are in cement and they have also got some other associated businesses and also a lot of institutions are not very happy with this stock, so I think that they are tending to stay away. I think the institutional holding in that stock has gone down quite considerably over 2008.

 

Q: Would you buy anything in aviation hearing the noises that you are?

 

A: I think Mr Ashwani Gujral was mentioning that it is a trader's market and therefore you have to take bets on things like you are buying on certain news, these kind of rumours Praful Patel, Aviation Ministry apparently made a statement which has come in the newspapers so there is probably going to be some run. There is interest in foreign ownership of Indian Airlines and if you look at the insurance industry and try to overlay it. So yes I think that will give bounce to all of them and it looks like they have all started off well this morning.

 

Q: It is news to me that you were with LML .

 

A: I was in LML at one point, I exited a while ago when the rubbish started coming out and there were all sorts of defaults with pain but I think definitely higher than current market level. I am not a great believer if once company start to have corporate governance problems, it can only get worse. I haven't really seen any company that has got better and that is why I will even say what I had to say about Satyam.

 

One of things that I am seeing is that the Nifty options are trading at quite high premiums and he talked about trade about selling at 2,950-3,000 but 2,950 options are probably 130-140 maybe even higher. So I think that is something worth considering as well.

 

Q: Top three picks for 2009?

 

A: I think that this year we will probably get a bounce in crude so I would want to buy something like a Cairn and short one of the refiners against it and put that on as a trade. I am also kind of market neutral so I would at this price probably change that trade as we go along.

 

Q: So long Cairn and short Hindustan Petroleum Corporation Ltd ( HPCL ) or Bharat Petroleum Corporation Ltd ( BPCL )?

 

A: Yes and I would also like to get into gold space, there are some gold funds out there but they are not stocks. I think thinking out of the box is going to make a lot of differences here.

 

Disclosure: It is safe to assume that my clients and I may have an investment interest in the stocks/sectors discussed.