Nifty to rise, buy on dips: Motilal Oswal

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Nifty to rise, buy on dips: Motilal Oswal

Nitin Rakesh of Motilal Oswal believes that the Nifty may move higher and advises investors to buy on dips.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS See Nifty bottoming out at 4650-4700: Ambareesh Baliga See 10-20% downside for mkts in Q1FY11: Tower Capital MS Invst Mgmt's top picks for next 12-18 months Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

Q: Are you looking forward to National Mineral Development Corporation Ltd (NMDC) or it depends totally on the pricing?

A: I think the indications are that the pricing is going to be at a cheap discount. The stock is already down 20% from where it was at peak. Based on the analysts meeting last evening, it looks like it is probably going to be at the lower end of the range which doesn't board well for the existing owners of the stock, but it is obviously good news for people who will buy in the offering. But I think something has to be said about the expensiveness, at least our view is that it is a little expensive as compared to its peers. Clearly there is an opportunity to get in, but it is very likely that it is going to be much lower than where the stock rules today.

Q: What is your takeaway from the meet on how this pits against other natural resource stocks though because up until now the float was so low that participating in it didn't make sense?

A: I wasn't in the meet, but based on the feedback that I heard, clearly the concerns are on the expensiveness, the concerns are also on the fact that the appetite may not come anywhere near this price. Even at the lower end of the range, people are talking about it being very expensive; in low teens to the book value clearly is an expensive stock. You could justify it by the liquidity premium, but I think that cannot be as huge compared to the other peers. So compared to peers, it is expensive.

At the lower end of the range, it still looks expensive. So I think it is going to be an interesting one to see how we salvage this one, most likely we are going to see some action, some saviours coming out from the individual's pockets, but I think it is going to be an interesting one to see clearly very cautious view on the price.

Q: Some of the loan rates are beginning to go up at the consumer end, housing, auto, consumer loans. Do you think at some point in the year, it might pose any challenge to demand or do you think these small increases or some kind of pressures on tightening will be absorbed without affecting demand for many of the consumer sectors in any meaningful way?

A: I think you have to see it in conjunction with the fact that the deposit rates are also inching up slowly over the past few weeks. So while we may have a quarter or so where the banks may have to adjust the deposit and the lending rates, I think in the long-term the demand is going to be robust and we are probably sub 10% in credit offtake and it is expected to go above 20% so that obviously should offset any concerns from the higher interest rate side.

Even on the consumer side the demand is fairly robust. So I think while we may have an uncertain period over the next few weeks when we let this equilibrium come back into play, I think over the long-term we are not worried about demand or the margin for the banking sector. In fact this is one of our top-favoured sectors. So I think the opportunity is out there for us to use this uncertain period and continue to build positions in those stocks.