Nov 09, 2012, 03.09 PM | Source: CNBC-TV18
Suresh Mahadevan, managing director and head of Indian equities, UBS Securities is in no mood to bet on State Bank of India (SBI) ahead of its second quarter results announcement.
Suresh Mahadevan (more)
MD & Head of Indian Equities, UBS | Capital Expertise: Equity - Fundamental ,IPO
"It is a stock where we have not been positive historically and that strategy has paid off well in the past. Private sector banks have outperformed the PSUs by a significant margin," Mahadevan told CNBC-TV18 in an interview.
Below is an edited transcript of the interview on CNBC-TV18
Q: What are your expectations from SBI today?
A: We have not been very positive on the whole PSU bank pack and that includes SBI. We have fundamentally not a very positive view on the name, but having said that, there is some chatter that results maybe better etc. However, we will have to wait for the event. Clearly, it is a stock where we have not been positive historically and that strategy has paid off well in the past. Private sector banks have outperformed the PSUs by a significant margin.
Q: In the last couple of days global markets have been terrible, but we have held out quite well. To whom do you attribute this resilience?
A: The resilience could be attributed to two things. One is earnings overall, though individually there have been bits and misses but overall has been okay. Two, a trend I am picking up is people are increasingly becoming at the margin more positive on India. These are people who have a choice whether it is Global Emerging Markets (GEM) or global people.
Also there is a fair amount of pessimism on China which seems to be helping us as we are seen with China. So, I can attribute it to those two things. But we think this market is still cheap. If you look at the Nifty EPS of Rs 430 for FY14 the market is trading at a little over 13 times. So there is definitely scope to move up to a 15 times earnings. We are constructive on the market at these levels.
Q: Tata Steel also announces results today. What are your expectations?
A: I do not remember the number, but we have not been very positive on the metal names. We have one name Hindalco in our portfolio and other than that we have not been very positive on metals, because of the nature of global economy, particularly China, the growth slowdown there. So we have been a little cautious on the metals pack, but specific to Tata Steel I do not remember the number at this point.
Q: What is your general sense from this earnings season? Did you take away a bit of comfort that earnings may have already troughed out?
A: Yes, that is certainly the case. At the margin the earnings have been quite alright. We were thinking that this quarter maybe, seasonally also it is not great, but in the end when the numbers came up it seems quite alright.
Q: What do you hear from your global clients on the sales desk? If there is any kind of dips in the Indian market because of global events, would they actually utilize those dips to be accumulating stocks here?
A: Yes, I would think so. Certainly we have been buyers at the margin for a while and people are obviously now looking beyond the consumer pharma sectors to look for opportunities in some of the other names. So, people are quite happy listening strong bottom-up stories even though they may not be very large cap. So that way we find quite a bit of interest. I think one theme which is particularly caught on is the digitization theme, where we get a lot of queries, stocks like Sun, Zee , Dish . So that is one area where there seems to be a fair amount of interest. So themes, bottoms, stories, people are quite keen to listen to them.
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