RBI likely to cut rates; bullish on DLF: PN Vijay

PN Vijay, Portfolio Manager, askpnvijay.com, says that the core inflation number which came at a three years low is a welcome indicator for the RBI to cut rates in the upcoming policy. The market also has to weather the Cobrapost scam on the leading private sector banks which are also very heavy on the index. The market has to put it away if it wants any meaningful move post a possible rate cut.

He feels that, post correction in rate sensitives there is a case of buying opportunity present in this space. He is very bullish on DLF as the company has the company has reduced debt by selling its non-core assets and the properties in Delhi, NCR is coming in for revenue recognition.
Also read: Mukesh Ambani stepping down from BofA board Below is the edited transcript of his interview to CNBC-TV18. Q: There was lot of volatility this week. How are you approaching the RBI policy, are you positive or a bit cautious?
A: I think the RBI policy will be quite favourable as the core inflation excluding fuel and food did come to a three year low. This could be a welcome indicator. 
There has been a marginal increase in wholesale price index (WPI) due to 20 percent increase in gas prices; cooking gas has been partially decontrolled.
Some on the street are expecting a cash reserve ratio (CRR) cut as analyst believe that there is not enough pass through of the rate cut.
Rate cut is headline catching and it makes a lot of noise and stock market does react depending on that for a short while but unless there is a pass through in terms of actual rate reduction which is not happening because of the tight liquidity in the money markets it will not be more than a cosmetic affect. So, many analysts are a pitching for a 25 basis point CRR cut also, if that happens, then the market will be on adrenaline.
The market also has to weather the Cobrapost scam on the leading private sector banks which are also very heavy on the index itself and some ticker are also indicating that the probe may extend to other private banks. The market has to put it away if it wants any meaningful move post a possible rate cut. Q: Many rate sensitive collapsed lat week. In the auto space, Bajaj Auto was down 9 percent. In banking space, ICICI Bank was down around 7 percent and the real estate also took a brunt on Friday. Do you see any investment opportunity in these rate sensitive stocks and with what investment horizon?
A: I think there could be an opportunity present here. It does not make sense to sell-off rates sensitive’s on the back of majority feeling that there would be a rate cut, so they can stay where they are. Developments in private sector banking space and high beta of these stocks can be attributed to the fall. So, there is an opportunity present, I would pick up DLF in the real estate space, which corrected on Friday. This stock is clearly on the uptrend after its efforts to cut down its debt by selling its non-core assets and properties in Delhi, NCR coming in for revenue recognition. So, it won’t be bad to pick up DLF at current levels.
Q: National Aluminium Company (NALCO) sailed through successfully on Friday and there are many more that are lined up from the government’s end, Steel Authority of India (SAIL) being top of mind. Which one would you be interested in and which one would you recommend?
A: I am not exited with the names you mentioned, I would be rather interested in MMTC and STC as they have a different business model and are cash and asset rich. These could be low risky buys. Unfortunately, the government is disinvesting commodity companies, metal companies and infrastructure companies, which sector of the market is shunning away. My biggest worry is that it will take the much required liquidity away. So I am not too excited about them.