Kotak Institutional's stock/sectors picks post earnings

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Kotak Institutional's stock/sectors picks post earnings

Sanjeev Prasad, Executive Director and Co-Head, Kotak Institutional Equities, is surprised by the expansion in net interest margins of private banks. He says one needs to watch out for non-performing loans of public sector banks.

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Sanjeev Prasad, Executive Director and Co-Head, Kotak Institutional Equities, is surprised by the expansion in net interest margins of private banks. He says one needs to watch out for non-performing loans of public sector banks.

According to him, the cement sector has marginally disappointed. "We do not rule out a correction in cement stock."

Kotak has increased Jaiprakash Associates target price to Rs 170 post its numbers yesterday, he added.

Here is a verbatim transcript of the exclusive interview with Sanjeev Prasad on CNBC-TV18. Also watch the accompanying video.

Q: What have you made of earnings season so far? Have you upgraded your IT earnings - for example, the frontline IT, did you like them?

A: So far so good. We have seen set of numbers from the two IT companies - TCS and Infosys - where the volume growth numbers surprised on the upside on the QoQ basis. Similarly, the private banks have also done pretty well with some expansion in the net interest margins (NIM) - more coming on the back of pretty sharp decline in the borrowing cost. Also, GAIL reported a pretty decent set of numbers yesterday. So in general, so far, we have seen most companies beating the numbers not by a very large amount but in general yes.

The only sector, which has disappointed so far, marginally, is the cement sector but otherwise results on overall basis are pretty good.

Q: You had penciled in for your universe about a 15% YoY growth in earnings. From the first few that you have seen does it look like that number could be closer to 20%?

A: I would think so looking at the fact that in general most of the largecap names are doing remarkably well - better than our estimates - I would think you would see some amount of positive surprise on an overall basis. So let's see what happens to the energy names, which is also a larger component of the index numbers.

Q: You spoke about private banks. They have reported good numbers the one PSU Bank which has reported is the UCO Bank and PSU banks is the one space, which is supposed to lag in this quarter because of what happened in the bond market. Can there be surprises from the larger PSU banks?

A: That's a difficult call because it's not as if the yields have moved up a lot this quarter. There is always some amount of flexibility to manage numbers. So the bigger issue is to see what's happening on the NPL side and if there is a big amount of increase over there then that would be a dampener. Otherwise I don't think there will be too much of an impact as far as the bond portfolio impact is concerned in this particular quarter. The more important ticker is to watch out is what's happening on the NPL side.

Q: There have been a couple of off centered stocks like Sesa Goa and Zee, which have announced have you had a look at those numbers?

A: Just a cursory look unfortunately because those numbers came out pretty late last night. But Sesa Goa, the volume numbers that surprised a lot on the upside compared to the second quarter numbers from what we were also building in so that's a prime region for the divergence so the number are pretty strong compared to what we had built in.

Zee is pretty much in line we had the Rs 1.15 billion of net income without any extraordinary PAT or anything and the company has pretty much reported that if we exclude one-off the tax provision, which has written back. Otherwise the Zee numbers are pretty much in line.