Investor sentiment in India now is terrible: PN Vijay

Portfolio expert PN Vijay of askpnvijay.com explains to CNBC-TV18 that though the global market rallied after the EU finance ministers' meeting and reasonably strong FII inflows, the Indian market remained sticky and investor sentiment was "terrible". Vijay adds that he sees no reason for the tremendous amount of pessimism in the Indian investor-community.

Below is an edited transcript of the interview on CNBC-TV18. Q: What are your thoughts on Axis Bank? Would you buy the stock after seeing the dip today or do you think after the 25 bps run-up?
A: Axis Bank has reported reasonably good results. I think they beat the street's expectations slightly in the bottom-line. The net interest margins held out despite the high cost of deposits. Though there has been a slight increase in non-performing assets, it is acceptable given the fact that the economy slowed down considerably last quarter.
A lot of positions were built-up ahead of the results and in the last ten days, the positions have been building up quite strongly.
I think it will become an excellent buy around Rs 1,000-1,010 levels because going forward most of these banks would improve their profitability and balance-sheets because of the effort being put in by the government especially for the power sector.
There is a lot of discussion regarding the conversion of many of the loans of the state electricity boards (SEBs) into equity and grants and this will mean that there might be a large write-back of power NPAs by all these banks. Going forward, I am quite bullish about Axis Bank.
I am not surprised that people sold on the build-up of positions. I would buy Axis Bank around Rs 1,000-1,010 levels. Q: What about the markets? They seem to have gone into a bit of a range…
A: The markets are very sticky. This is surprising since global markets have rallied continuously. In fact there was a huge global rally of 2% on Friday and the market in India on Monday, just sold off. This is in spite of FII flows being reasonably good.
There were had reasonably strong flows in July. So I think the retail sentiment is very weak and will slowly set right. If you look at the fundamentals, there was a slight improvement in inflation and I don’t think core inflation in India will fall much below 5% as the economy is growing fast. The trade deficit was reasonably good; it fell to pretty low figure.
Some macro-factors are improving. The IIP was reasonably okay compared to estimates. I don’t think there is any reason for pessimism among retail investors in India.
Probably after the Presidential elections, if the government taken any major initiatives, the sentiment may change. So, on the whole I would say that global sentiment for equity is reasonably good after the finance ministers' meeting in the EU. But the Indian sentiment right now is quite terrible.
Q3: Do you think the poor investment sentiment is because of the monsoon and related concerns? What's your estimate on how bad the situation may become and its affect on the markets?
A: The monsoon is surely a local concern and I won’t call it a washout because rainfall is not a mathematical calculation. Though it was delayed in the North-West, the shortfall was reduced tremendously with continuous rains in Delhi and Punjab.
Karnataka and parts of Punjab and Haryana have received little relatively less rainfall. I wouldn’t get into a panic attack on the monsoon. I agree to its affect on the sentiment,  though India recorded the highest-ever grain exports by any nation in the last ten years.
So I don't see any shortages developing. But it is surprising that the monsoon should hang heavy on investors’ minds as agriculture constitutes a fairly insignificant portion of India’s economy. Q: How do you expect the top four Indian IT companies to perform?
A: There is again lot of pessimism about the IT sector after the Infosys' results. I advise caution on the IT sector for two reasons. Firstly, growth and capital expenditure in the US remains uncertain going forward and secondly, the volatility of the rupee.
At some time, Infosys could come back into the buy list. But right now, the only stock investors could seriously eye is HCL Technologies for two reasons - it is not BFSI-centric as rivals Infosys, TCS and Wipro, and its operations are spread across regions.
So, investors could probably buy HCL Tech at dips. Investors having HCL Tech shares should hold them as the prices have fallen. But investors should make no fresh purchases and instead concentrate on infrastructure, banking and auto stocks. If at all, the Indian stock market is going to go up, it will do so when sectors of the economy grow. Q: What would your preference in the auto sector be?
A: The current attitude towards the auto sector is to avoid two-wheelers for sometime. Though they have very good counters like Hero MotoCorp and Bajaj Auto, the environment is very adverse. Auto stocks like Tata Motors, Mahindra and Maruti are quite okay.
Given a choice, investors could go for Tata Motors as their sales numbers are not too bad and the stock has corrected considerably from levels of about Rs 290 to about Rs 225-230 from which it normally bounces back.
I think investors may like Mahindra also but my preference is for Tata Motors because my principle is when the price of a blue-chip stock falls you always pick it up. Tata Motors is a blue-chip which has corrected a lot and over the next one year, I think it will deliver very superior earnings. Q: You were quite positive on infrastructure stocks. Which ones would you pick up?
A: Yes, infrastructure is a very big word and investors should go for stocks which are concentrating on EPC and tolls. Larsen & Toubro (L&T) has been showing good traction both in order flows and in execution. In fact, the execution in the last quarter was excellent.
So L&T would be a good buy on a decline. I think most of the market also been doing that. Second, IL&FS Transportation Networks (ITNL) is a stock I like a lot because of its business model. The company has a very strong toll revenue. Next comes ITNL, which is an excellent buy and I expect very good results. So if one is going for midcaps, ITNL is a good bet and if one wants to buy blue-chips, then L&T is a very good bet.