Mar 06, 2013, 08.20 AM | Source: CNBC-TV18
Despite the midcaps seeing a bounce in the Indian equity market today, Gautam Sinha Roy of Motilal Oswal continues his cautious stance on the stocks.
Gautam Sinha Roy (more)
VP-Equity Strategy & Product, | Capital Expertise: Equity - Fundamental
Last week saw a dramatic fall in the share prices of about a dozen mid-cap stocks on the same day. Shares of Eros International , ABG Shipyard , Welspun Corp , Orbit Corp , Opto Circuits , Aanjaneya Lifecare had been battered on the street due to heavy selling.
However, Roy expects MCX to make a strong comeback in the market. Justifying his bullish stance, Roy says, "We have seen Commodities Transaction Tax (CTT) being introduced and that hangover is now already in the price. Going forward, it should discount the fundamentals for the company that continue to be very strong in a better way."
Below is the edited transcript of Roy's interview to CNBC-TV18.
Q: It has been a good run for the market today. However, what sort of correlation are you spotting with the Indian market as well as the globe at this point in time? With the Dow sitting very close to a second record high, how much of an incremental increase could we see for our market?
A: That is a very pertinent point. We have seen Indian market and other emerging markets being more of a risk-on trade in the last four to five years. So, whenever we have seen a risk rally happening, Indian market has been participating ahead of many other markets. We are seeing the same thing now too. Last week we had seen risk-off kind of trade happening with the US Dow rallying there. We saw Indian market taking a beating. Volatility rose and even other asset classes have seen a fall because of this kind of a trade. So, that correlation is very strong. We expect that to remain and that would be one of the key macro-drivers of trading in India going forward too.
Q: What are your views on the midcap carnage we saw last week?
A: Thankfully most of the stocks that we like have not been affected so much by the carnage in the last week, but the very fact that volatility has bounced back makes us more cautious in choosing our stocks. So, that is why we have been sticking more to large cap quality names.
However, one stock that could bounce back could be MCX, because we have seen Commodities Transaction Tax (CTT) being introduced and that hangover is now already in the price. Going forward, it should discount the fundamentals for the company, which continue to be very strong in a better way.
That is one stock we would be more positive post the carnage. However, other than that, I do not think that just because of a one day bounce back we will suddenly become more bullish about most of these midcap names which have fallen.
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