UBS Sec: Good level to enter mkts, suggests stocks

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UBS Sec: Good level to enter mkts, suggests stocks

In an interview with CNBC-TV18, Suresh Mahadevan, Head of Research at UBS Securities, spoke about his reading for the markets.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Nifty volatile; pvt banks, oil & gas down, tech, metals up Asset markets indicate greater weakness: Nomura See downside risk in global mkts: Bank Julius Baer 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 Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Steel Authority of India | Hindalco Industries | Sterlite Industries (India) | Maruti Suzuki India | Tata Motors | Mahindra and Mahindra | Larsen and Toubro | NCC | Hero Motocorp | NTPC | Adani Power | Tata Power Company | Punjab National Bank | Bank Of Baroda | ICICI Bank | Infrastructure Development Finance Company | HDFC Bank | Lanco Industries | Zee News |

Q: The one space which has been quite weak and has leaded the market on the way down aside of infrastructure has been private sector financials. Is there any reason why this space has become so sticky?

A: Our view on banks is generally positive and we have a bias towards the public sector. The only bank currently which we like in the private space is ICICI Bank. We are quite positive on Punjab National Bank or Bank of Baroda for that matter. The biggest worry is that banks under perform in a rate cycle. We are going from very easy monetary conditions to perhaps easy monetary conditions so. To that extent, it coupled with economic recovery and should result in good credit growth. Investors worry around non-performing loans and will start shifting towards credit growth. This should be positive for the sector in the medium-term. At this point, other than ICICI Bank , we do not like too many of the others. We are either neutral or negative on them things like IDFC or HDFC Bank .

Q: Did you look at the NTPC FPO. Did you participate there?

A: We do cover NTPC as a company. Currently, we are neutral on that because in power space we like Adani Power , Lanco or even Tata Power . So those kinds of picks are there in the power space. We are neutral on NTPC.

Q: There is an initial public offering (IPO) open from Hathway, not specifically on that, but generally, on the television distribution space, do you have any calls?

A: We like Zee TV , which is not really that but that's a name we cover. We quite like the company because we think it's a good play on the digitisation of India because currently a lot of 'mom and pop' cable operators massively underreport subscribers, which all changes at the margin when either you go for digital cable or direct-to-home (DTH), which a company like Zee could benefit.

The second thing is of course ad revenues. We believe will follow with (a) economic recovery and (b) with gross rating points (GRP) of Zee moving up. So that's a stock we have been recommending to investors in the media segment.

Q: SAIL is up 3% to Rs 210-211 now on talk of a bonus before its FPO but you are not particularly excited by that story - are you?

A: No, we are not. Steel is a sector, we are kind of neutral to negative and within that we have a sell on SAIL. But JSW Steel and Tata Steel, we are kind of neutral on those names and my sense is there is also a global view, obviously given some of these commodities are globally traded, there is a clear global view that kind of dominates what we can do from India as well.

Q: Why SAIL particularly? Is it valuations or something specific to SAIL?

A: We have generally preferred the private sector plays in the past and even with SAIL has not been an exception. Unless there is a big valuation gap like in banks we prefer the public sector names but there is a huge valuation differential. Whereas, here we didn't think there is enough valuation differential to justify that.