Angel Broking reviews Infosys, Shree Renuka, GMR

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Angel Broking reviews Infosys, Shree Renuka, GMR

Phani Sekhar, fund manager, Angel Broking in an interview to CNBC-TV18 shared his views on stocks across various sectors while answering investor queries.

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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

Phani Sekhar, fund manager, Angel Broking in an interview to CNBC-TV18 shared his views on stocks across various sectors while answering investor queries.

Below is the edited transcript of Sekhar's interview with CNBC-TV18. Also watch the accompanying video.

Caller: I have purchased 35 shares of Infosys at Rs 2,708. What's the call on Infy? Should I hold it or sell on rally? What are you expecting from the earnings this time?

A: In the near-term a lot of good news is already there is the price because that was on the back of this rapid currency depreciation. A lot of it is done and dusted. Now what will drive the stock from here is the commentary on volume growth. For this quarter I don't think there is much expectation on volume because there is a seasonably weak quarter with very weak number of working days as compared to the other quarters.

The general commentary on the state of the US markets and what's happening on Europe is going to drive all large cap IT stocks. If the investor is not in a tearing hurry, his strategy can be little different, because there is going to be lot of volatility both on the back of currency as well as news flow.

He can look at adding Infy on days of steep decline. If he can keep his average price around this Rs 2,700 mark which is closer to his first purchase price and wait for one, one and half year I think he is looking at a price of not less than Rs 3,100 or 3,200 over a longer timeframe of 12-18 months. However, in the near-term there is going to be some amount of volatility.

Caller: I hold Shree Renuka stocks. What is your call from hereon in the near-term? I am a trader.

A: In the near-term a lot depends on what kind of news flow you hear, especially on the domestic front whether exports are allowed or not. Even if they are allowed I don't think apart from a small trading pop here or there you are going to get anything. My primary concerns are more related to medium and longer term which is that the Brazilian operations are not looking as good as they were maybe six months back. This is because in January to March, this current quarter one is expecting a shortfall in ethanol production in Brazil.

Going by the evidence, last year Brazil had to import ethanol from US because of rise in domestic ethanol prices. Considering Brazilian Government's objective of promoting ethanol at domestic passenger car market, one might see that there might be both incentives for growing ethanol and disincentives for exporting sugar in the Jan to March quarter which also happens to be offseason, which exactly is not such a good news for Shree Renuka.

On top of that the balance sheet seems to be pretty stretched around 5.4 times net debt to EV EBITDA. This calendar year one is looking at a capex which is compulsory and inevitable in the form of planting, maintenance and there is going to be buyback of shares from RdB. Working capital cycle is also going to be stretched for domestic operations which might increase debt by Rs 1,000 crore for this calendar year. Considering all this my outlook for medium to longer term is pretty gloomy. Near-term I don't know it's all completely news driven, but at least for medium to longer term investors it is a clear avoid.

Q: The infrastructure stocks at long last appeared to be bottoming out. Lanco , GVK , GMR , in any of this would you take a longer term bet?

A: Longer term means very longer term because the basic outlook for many of these sectors per se have got so much sullied that it will require a very brave person to take a call for the next one year or so. Although there are catalysts like interest rates coming down in the near-term. All these are catalysts and for stocks that have fallen 75-80% over one year timeframe they can always bounce back by 10-20%.

Even if interest rates come down by 100 basis points, I don't see any respite for these stocks except for the fact that they might be 10-20% higher from these levels. They require a serious change in policy across these major sectors of power and other infrastructure mainly related to land acquisition and mining. Only then one can see some sustainable rallies in these stocks.

Apart from that I don't see any investor picking up these stocks which are so much beaten down for a 10-20% rally. The assumption when most of the people buy these stocks at lower double digits is that these stocks will double or triple over a year's timeframe. I am not sure whether that's going to happen in the current policy environment.