Jul 21, 2013, 12.33 PM | Source: CNBC-TV18

Bullish on IT, Tata Chem; pvt banks seen in focus: Joshi

"IT seems to have regained flavour," said Sharmila Joshi, Head of Equity of Peerless Securities, in an interview with CNBC-TV18. She expects private sector banks to be in focus next week because of expiry of F&O contracts. She sees Tata Chemicals climbing back to the Rs.325-350 band.

IT should be the area of focus, said Head of Equity of Peerless Securities, Sharmila Joshi, in an interview with CNBC-TV18. She says that this quarter even midcap IT companies reported good earnings. Although they had support of the depreciating rupee, the companies sound confident as they have shown growth in client addition. “In iGate, Hexaware , MindTree , we have seen a good set of numbers,” she said.

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Commenting on Hexare’s performance in particular, she said, “We have infact upgraded our target from Rs 115 to Rs 135 given that the management sounded so positive on maintaining margins as well as growing clients in coming quarter as well.”

She feels that the private banking sector might come into focus because of Futures and Options (F&O) expiry next week, considering they have not been performing well.

With refernce to Tata Chemicals she said, “It has a good potential to go back to Rs 325-350 kind of levels.”

Below is the edited transcript of her interview:

Q: Last week a lot of the good performances in terms of earnings were rewarded by the stock markets. So, Tata Consultancy Services (TCS) was up close to 9 percent. Bajaj Auto was up close to 6 percent while on the flip side the disappointing earnings got knocked back quite a bit, names like Kotak were down about 10 percent odd or so. From the list that I mentioned are there any stocks that you would accumulate at this point?

A: Perhaps not TCS or Infosys but I think IT seems to have regained flavour. I think that is what you could focus on. Even the midcap IT companies have reported good numbers.

They have also had support from the fact that the rupee has depreciated but even the kind of growth they have shown in client addition, they have come out sounding quite confident. So, whether it is an iGate, Hexaware, MindTree we have seen a good set of numbers.

IT is a sector which is back in focus and you could see some amount buildup there. In fact one of the recommendations that I do have is on Hexaware which also reported a very strong set of numbers. We have infact upgraded our target from Rs 115 to Rs 135 given that the management sounded so positive on maintaining margins as well as growing clients in coming quarter as well.

Q: We are in the thick of the earnings season now. Next week we have important triggers like the Futures and Options (F&O) expiry as well. What in your mind is the most important stock or segment to focus on next week?

A: Probably the private banking space. We have seen this cut come very sharply in this last week or so. So, a lot will all now depend on what kind of pressures this sector faces in the run up to the expiry. However this is shorter expiry from that point of view, so, I am not expecting too much of a recovery, but some of these names look very oversold. So, I would expect some amount of recovery based on that.

There might be important results that might surprise us. However I don't really see too many of those names, I think that we will have to play it as it comes because we do have a lot of important numbers, but as a space probably private banking could come into focus because of expiry.

Q: You have a call on Tata Chemicals for next week, what is the idea behind that and what could the price target be that you are hoping to achieve?

A: Its not just next week but this stock is emerging from the low that it made and its consolidating at this level and it has a good potential to go back to Rs 325-350 kind of levels that kind of a price band.

Things have been quite bad for Tata Chemicals in this last quarter where they had that European write down as well as domestically things don’t look too good. In Kenya too they face problems. What I think is that you have to look at Tata Chemicals as sum of parts kind of business. Then you have to look at the kind of market share that they have in salt and then in soda ash, fertilizer and the fact that they have investment in other Tata Group companies.

The sense that you are getting, that a lot of these fertilizer companies are now beginning to do better and we have seen in fact Rallis declare fairly good numbers last week. So, based on all that Tata Chemicals now looks quite nicely priced and this is a stock that you should buy if you have a couple of quarters kind of a view and I would expect targets of about Rs 325 on the stock.

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