See Nifty in 6000-6100 range; bullish on Infosys: Emkay

IT stocks are in limelight ahead of Infosys's Q2 results on Friday. According to Krishna Kumar Karwa, MD, Emkay Global Financial Services, most IT stocks gave a 20-30 percent return in Q2. He himself is bullish on Infosys with a medium-term perfective.

Also Read: Infosys Q2 PAT seen up 9% at Rs 2593 cr: Kotak Securities
"Most domestic funds are overweight on the sector and if Infy delivers a decent set of numbers and guidance it will only reiterate their positive view and the stock should continue to deliver in the medium term," Karwa told CNBC-TV18.
Meanwhile, he sees Nifty in a range of 6000-6100, with the index likely to see correction at the higher end. He says valuations are rather attractive in sectors such as capital goods, banking, financial stocks, among others, but investors need to have a sufficiently long time horizon and risk appetite for that. Below is the verbatim transcript of Krishna Kumar Karwa's interview on CNBC-TV18 Q: How is your trading desk approaching Infosys, multitude of views out there, some expecting as the former pattern that there will be big moves and others believing this time it could be flat?
A: Everybody is expectedly waiting for results and guidance from Infosys but if you look at the whole IT pack, most of the stocks have delivered 30-40 percent kind of returns in the last one quarter. So our view is that the momentum is there with the sector and it will continue to do well but there could be a kind of a pause post the result but expectations have got built up too high. Specifically for Infosys, we are positive on a top-down and medium-term perspective and even if you look at – relatively Infosys has not underperformed the benchmark index in the last three months.
So in terms of volatility probably tomorrow will be a day when it will not be as volatile as it has been in the earlier quarters and investors would be expectedly waiting for what kind of guidance comes in terms of annual revenue growth and margins. Q: What is the view on the market itself, this rally came out of nowhere? Time was 40 days ago or even five weeks ago that we were wondering whether even 5,200 would hold, on one terrible day, it even went to 5,100, no one talks like that now, can this rally get on into a Santa Clause rally till the year-end, how do you see the indices itself?
A: We have already entered into that corridor of uncertainty, which is 6,000 to 6,200. We have just crossed 6,000. So logically speaking based on past track records and also based on the expected earning growth etc for the immediate term, 6,000-6,100 seems to be a kind of level where markets find a reason to come back or rather correct from those levels as such.
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So you have to be careful whenever the indices reach these kinds of levels. But what has happened in the last 30-40 days has been that the domestic news flow seems to be turning positive - be it trade data which came out yesterday or other last three months trade data has been on the positive. So these are small incremental positive news flows on the domestic front which has helped the market to be where it is. Q: You think unlike the previous times when the Nifty used to go to levels of 6,000-6,100 face resistance and retract, this time around it could be different and the market has the inherent strength across it and maybe move much higher maybe to 6,300 levels?
A: No, I don’t think so because if you look at the main index itself, the IT sector which has around 18 percent kind of weightage has already delivered 30-40 percent kind of return in the last one quarter. Then you have the other measure segment which is the banking and financial services where you are not expecting any great positive news flow in terms of actual numbers maybe there could be some policy announcements, which could possibly be positive for the sector. If you go sector by sector, then there are not too many segments where incremental positive news flows can come in. So logically speaking, 6,000-6,100 odd levels should act as a resistance in the immediate. Q: How are you approaching the market in terms of investments, are these levels where you are picking stocks at all or would you buy only on dips?
A: It all depends on what is the investor mindset. There are investors who always believe in positive momentum and IT stocks have a positive momentum. There is good amount of earnings visibility and the recommendations have been to buy on dips and to continue to stay invested. That is the segment where we believe as far as those kind of investors are concerned, but if you look at the valuations then maybe the banking financial stocks or infrastructure, capital goods stock there valuations are reaching very attractive levels but for that the investors need to have a sufficiently long time horizon and risk appetite.
So we are depending on the investor appetite and are also happy to recommend those kind of sectors and stocks to those kind of investors. So it is a mixed bag. Earnings visibility and also valuations - these are the two key parameters that we tried to follow in terms of recommending stocks.