What is Angel Broking's view on ICICI Bank, Maruti Suzuki, Ranbaxy?

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » 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 ICICI Bank BSE | NSE 29/05/12 Are Mutual Funds betting on ICICI Bank? Other Stocks in this news Maruti Suzuki India | Ranbaxy Laboratories | Tata Sponge Iron |

Phani Sekhar, fund manager from Angel Broking, in an interview with Latha Venkatesh and Anuj Singh, spoke about his reading of the market and his outlook.

Below is a verbatim transcript of the interview. Also watch the accompanying videos.

Q: What is your sense? We saw some sort of stability coming back to the market. Off-late it has been quite volatile. What would be your advice?

A: Although it has been volatile, we have been seeing that 5,350 level has been held even on the most bearish news flows. The market has been fairly resilient. Since there are no great positive triggers, but even in the phase of even the gravest of the negative triggers, this level has been held.

The market is forming a very strong base around these levels. At the same time, it is difficult to make a call for any significant upside breakouts above 5,550-5,600. At the same time, one is witnessing a significant sector churn with no visible sign of a new leader emerging.

We are in a situation where every week or second trading day, we see a sector or stock leading the market. It is not failing to sustain, but the overall market is holding the levels. It is a bit of a confusing time for positional traders. For investors, it is a good time to pick and choose your stocks with a long-term horizon.

On ICICI Bank

If the ICICI Bank stocks were bought three-four months back, then one should have looked at some exit on one of these spike ups. If this stock was bought three-four years back, it needs to be sold at these levels, as 900 four years back might have been a bit high on valuation terms. Today, 1,000 looks pretty interesting, especially in the wake of the current deal in the insurance sector.

ICICI's insurance business being a leader in the private sector would certainly merit those kinds of valuations. Factoring in all those and the turnaround in the bank, if you wait for another one to one and a half years, we can see levels of 1,250 to 1,300. I would advise the investor to hold on and maybe around 900 levels, one can accumulate more.

On Maruti Suzuki

Maruti Suzuki is a clear hold because sentimentally nothing is helping Maruti. One day we have yen appreciation and the other day we have commodity price increasing. If everything is fine, we would have some kind of an unfortunate event happening in Japan.

One has to appreciate that in markets there are times when things will not go your way. This is one of those times for a company like Maruti, where in spite of increasing competition, it has done a good job in protecting its market share. The erosion in market share has happened mainly because of constraints and capacities, rather than it losing market share on the ground.

There are ups and downs in margins which is a concern. In FY08, we had seen that most of the auto companies had a problem in margins, but sales were doing well. The same thing more or less has been played out with margins coming off by around 250-300 bps, but sales are doing well. The investors have to keep an eye on.

1,460 looks a bit far today's scenario, but another one and a half to two years, you can see prices of around Rs 1,650-1,700. Investors can think of averaging down his acquisition price by buying for the long-term at these levels.

On Ranbaxy

One should stay invested on Ranbaxy because to be a longer-term investor, these kinds of news flow based shocks are to be expected in pharmaceutical companies. Lipitor was to our mind and to most of the market was a done deal, as we remember the kind of litigation Ranbaxy went through for Lipitor. It was being eagerly awaited. It was the premise for buying Ranbaxy most of the time.

The fall in the stock price is very well justified. One should not sell down the stocks at these levels because the downsides from here look very limited. Assuming Lipitor will not happen or will most probably be delayed, Ranbaxy didn't consider Lipitor for the guidance of this calendar year. If we take out Lipitor for this year, the profit growth looked flat. From those levels, the stock is down 20%.

Most of the correction and the bad news is in the price. If any positive developments take place from here, we can see some 10-15% upside in Ranbaxy from these levels. The stock to go back to around 575-600 levels, the market needs stronger visibility on Lipitor and improved performance on Aricept. Till both those things happen, the stock will languish around 450-460 levels.

One should not be taking money at these levels because it is completely news based. The company is more worried than the street because Lipitor was something that was hugely banking on. Post that, Lipitor deal was a major driver in Ranbaxy's valuations when Daiichi-Sankyo bought it.

On Tata Sponge

Tata Sponge is more of a value stock. There are no growth drivers in this stock for the next two years, till the time it gets hold of the coal mines and starts producing from it. It is a low cost player and with extremely good operating metrics. Valuations are extremely good at less than one time book value.

Being from Tata Group company, it makes immense sense. Lack of growth drivers is making the stock languish at these levels. One should not be surprised with the spike up in the stock because it had to trigger for it to go up. With Tata Steel denying it, the stock might sulk. It was up by around 25% in the last two trading sessions.