Quite upbeat on Q3, like auto, banking: Motilal Oswal

Below is verbatim transcript of the interview:

Q: Your broking business was up 7 percent on a sequential basis and a strong year-on-year jump as well. Can you tell us how business was on the ground and whether you are seeing the same momentum continue into this quarter as well?

A: I think momentum continues although in Q2 the cash market volume was down by about 10 percent quarter-on-quarter. Q1 was excellent especially May and June although in Q2 the overall activity remained quite stable. In that sense, the quarterly numbers on profit level is more or less same but the revenues are up. In the next six months at least the market activity will accelerate from here because now the government is on action mode and we are directly impacted by what is happening on the ground.

Macro economic indicators have turned favourable whether it is currency or inflation numbers or growth numbers or corporate profit numbers so far are good. Therefore, we remain quite upbeat for this quarter. After a long time we are seeing very good traction in all our segments and businesses.

Q: It has been a great year for us between last Diwali and now the markets are up about 25 percent and now reform momentum has also kick started. What are the sectors that one should be bullish on, should one stick with some of the classical defensives like IT, pharma or should one start to get a bit aggressive in the market with respect to cyclicals?

A: If you want to take a call on the overall economic then I would call it ABC sectors which to me looks exciting, A is auto, B is banking and C is cement because they are all direct play on the economy.

Then the defensive sectors like technology although the growth is slightly concerned but technology, FMCG and Pharma, most of the quality stocks would be there. So you need to fairly balance between all the six-seven sectors although I remain quite optimistic, more optimistic on auto banking and cement at these levels.

Q: Your i-banking business seems to have fallen in terms of revenue as well as profit before tax performance on a quarterly basis sequentially as well as on a year-on-year basis. What took place in this quarter for your i-banking segment and is momentum now picking up because of capital markets picking up?

A: I-banking business is lumpy on quarter-on-quarter basis although in Q1 we booked quite big revenues on that perspective.

The numbers will not be seen as business slowed down because in investment banking transactions normally the cycle time is slightly longer. So I remain quite optimistic that this year business will be far better than what we have seen in last two-three years.

Q: You were telling us about the sector preference, the ABC sectors that you like but what about the reform process itself? There are now hopes that in the winter session of the Parliament from November 24, things like insurance, labour reforms could be taken up. What would be the three points on your list, something that would please you in the next couple of weeks or months from the new government?

A: If you see last four-five days post the elections, you are seeing the reforms being done on the petroleum sector both gas as well as on diesel price decision has been taken and yesterday it was about coal.

The infrastructure whether it is coal, gas, labour reforms, all are looking at the track record of this government and especially in last three four days now the government is committed to accelerate this process and that gives me comfort that lot of bigger initiatives which are on their mind, will start being pushed.

Insurance bill may be taken in next session. For GST you will again see lot of clarity whether now any consensus has arrived within the states and the centre although lot of work has been done on the ground.

We are seeing the action on the ground widening the financial inclusion programme where they have added more than Rs 6 crore bank accounts in this country.

Overall the government is in hurry to push the reform agenda and that gives us comfort that we can be reassured about the overall macro economic indicators becoming much more favourable. Somewhere the oil price have also given us lot of respite and then global markets also are stable.

The FIIs continues to invest in India and luckily now the domestic mutual funds have also started net on buyer basis. All those things give me confidence that we are on the right track.

Q: Based on the optimism and the movement from the government can we touch a new high or scale past 8000 quite comfortably by the upcoming Budget in February, what would your assumption be on the Nifty target or a Sensex target by then?

A: Once we start seeing an activity on the pre-Budget rally which typically starts from December and January, I am quite hopeful that the markets will touch new highs. The only issue that remains is that when you see the interest rate cut, are we away from that from two quarters or one quarter.

The single most important thing which is also seeing by all kinds of investors specially is the stability in the currency. So far we have been able to take a lot of productive stands and that gives us comfort that the currency also is being quite stable in that sense.