P Lilladher cherry picks 2 stocks each from metal, aviation

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P Lilladher cherry picks 2 stocks each from metal, aviation

It has been a choppy day for the markets but metal and aviation stocks continue to shine in trade today. Sharing his views on theses two beaten down sectors, Sandip Sabharwal of Prabhudas Lilladher feels Hindalco and Sterlite Industries will do well from the metal space.

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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

It has been a choppy day for the markets but metal and aviation stocks continue to shine in trade today. Sharing his views on theses two beaten down sectors, Sandip Sabharwal of Prabhudas Lilladher feels Hindalco and Sterlite Industries will do well from the metal space. Spicejet and Jet Airways will be the key beneficiaries from the recent meltdown in the aviation sector.

Commenting on the markets, he says, "This is a golden opportunity for stock pickings because the valuation gap between the broader market and indices is close to its all time highs of 30-35%."

Below is an edited transcript of Sabharwal's interview on CNBC-TV18. Also watch attached video.

Q1: What is your view on the metal space? Hindalco and Sterlite both of them are up close to 5%. What is your take on both of these counters?

A: Normally I don't invest too much in the global commodity space. However, at current levels there exists a significant value in the entire non-ferrous space. Stocks have come down significantly and they are trading at compelling valuations in terms of price to book value and the underlying commodity prices have come off significantly. So there is very little downside left in these stocks. The fortunes of these companies are linked to aluminium prices. Secondly, some improvement in economic data from the US and China and expected improvements across the emerging market space this year will also be supportive for the metal prices. Hindalco and Sterlite Industries should do well going forward in this year.

Q2: I want your view more on the broad rally that we have been seeing since that 4600 mark. Would you say it is time to buy on dips as stock valuations are now making India attractive and the bottom is in place at 4600?

A: Last time when we had an interaction, Nifty was around 4600 mark and my view was that sentimentally markets had bottomed out and value wise only a matter of time. There was so much pessimism in the market that even small amount of positive news flow was enough to take the markets up and improve the sentiments. Also the broader market moving up has improved sentiments because in the second half of last year the markets had bounced back and sharp were witnessed but the broad market continued to slip even further. Now the broader market has started to recover which has led to some improvement in sentiment. I am not sure whether the bottom has been made or not but the whole point is the outlook overall for the entire year looks much better given the way the rupee has come back.

Also it will be important how RBI policy will be panned out. One should not read so much into a statement and concentrate more on action. The way RBI has been conducting Open Market Operations on a continuous basis indicates that they are now easing stance.

Q3: What would be your advice for high networth individuals to pick stocks? Are you asking your trader clients to take profits around 4900-5000?

A: It is a difficult market for traders because the way markets have moved traders would have missed most of the part of the rally and then markets will bump into some technical resistance and move down. So we are unlikely to see tear away rally in my view. Traders have to operate in small narrow bands of Nifty.

But for investors this is a golden period because the valuation gap between the broader market and indices is close to its all time highs of 30-35%. A tremendous value in the broader market exists and that needs to be picked up at current levels. The broader market will do much better than the indices once the rate cycle peaks out and begins to move on the downside. When interest rates are moving up large cap indices do much better. So this is the right time to get into broader markets.

Q4: What are you picking up by way of nuggets? What are you advising to your clients in terms of stock specific?

A: There is value in the airline space. Kingfisher and Air India are in a bad state. Amongst aviation space, Spice Jet and Jet Airways will be clear beneficiaries. Investors check fuel prices but the key is that competitive intensity will reduce in India over the next 2 years and that will benefit these two companies. Spice Jet was trading close to Rs 100 at one point of time and today it went down to as low as Rs 15. Jet Airways was at Rs 780 a year back and today it's around Rs 200. So there is value in these kinds of stocks.

Infra space excluding companies that are highly leveraged is another sector to look for. There are companies which are not so highly leveraged and have reasonable order books will do very well.