Mkt in for breakdown; bet on ONGC,RIL: Sangeeta Purushottam

There is a possibility of the market heading towards a breakdown again, cautions professional investor Sangeeta Purushottam.

The Indian market is too dependent on foreign fund inflow, which has now slowed down and the internal macro data is unlikely to see significant improvement in the six months, so one cannot be sure if the market has found its bottom, she said in an interview to CNBC-TV18. "This year will be choppy and elections are going to add to the uncertainty," she added. On stocks, Purushottam is bullish on index heavy weights ONGC and Reliance Industries and recommends buying them at lower levels. Given the compelling valuations PSU banks are offering long-term investors should add them to their portfolios.

 

Meanwhile, the upcoming earnings seasons is unlikely to be a game changer for the market because poor GDP data will have an impact on corporate earnings and the market is not unaware of this, she noted

Also read: Market remains choppy; it's a no trade day: Sukhani Below is the verbatim transcript of his interview to CNBC-TV18 Q: Is the market threatening to breakdown again you think?

A: That possibility exists because we do tend to overshoot both on the upside as well as the downside. So, it is really difficult to say that we found the bottom yet. I had mentioned this earlier that this year will be choppy. We are very dependent on flows. The moment one sees the flows slowing down or reversing, it is going to have an impact on the market. As far as the internal fundamentals are concerned the data is going to be mixed. For the next, at least six months expecting a significant improvement in the numbers is not going to be possible. So, we need to lift through this whole choppiness for this year and added to that is the uncertainty that the elections are going to throw up. So, that is how the market really is going to behave. Q: The first one in terms of earnings will be IT and it is interesting that Infosys is now trading at the lowest level. How do you think IT will perform and what will it do for the market?

A: IT should hold on reasonably well. So, I am not too concerned about the earnings variety. The reason that Infosys has come off from its highs is that when money starts to withdraw, you are also going to be selling stocks which have actually performed along with those which have not. We have seen a selloff in the frontliners just like when money was coming in we saw most of the frontliners go up. So, the softness that we are seeing in Infosys in the last few days is really symptomatic of money moving out rather than something very specific.

Q: What would you say is happening with oil heavy weights like Reliance Industries and Oil and Natural Gas Corporation (ONGC) then?

A: That is a pocket which I personally find quite interesting. If we are looking at any plays on reforms then ONGC and Reliance have the capacity to throw up positive surprises going forward. So, I would actually look to add these stocks at lower levels if the market provides that opportunity. Q: What about the PSU banks, what would you do with them now?

A: Well at these levels the only logical trade on PSU banks is to actually buy some because when the market moves up you will get a trade if nothing else. If one is a long-term investor then the sub one time book values that we are seeing could couple of years later, looks like great entry points. So, selling them at this point doesn’t make sense, the valuations are fairly compelling.

Q: On which sector are you most positive going into earning season? Where do you think there will be the greatest validation in terms of earnings performance?

A: To look for validation in this earning season actually doesn’t make too much sense. As we are seeing a slowdown, we have seen the GDP numbers come through and that poor growth is going to reflect in the earning season. The only thing which will happen is that the consumption led sectors will show a slower deceleration. So one will see some slowdown there, but it won't be as dramatic as we are likely to see in the more cyclical part of the market. So, I don't think the key really is so much this earning season and this is pretty much known. It is really how policy is going to pan out and what is going to be the pace of change going into next year. Things are turning positive but it is really the pace of change which is important and whether that gets derailed by the political process or not. So, I am not really looking at this earning season as any kind of game changer.