IT can be good bet for 2013 if Re weakens further: Expert

In an interview to CNBC-TV18 Sandip Sabharwal of Prabhudas Lilladher shared his outlook on the market and stocks across various sectors.

The overall scenario for the Indian IT sector seems to be stabilizing. One can bet on this sector if the rupee continues to remain at current levels or weakens further, he suggested.

Meanwhile, he expects interest rates to fall significantly this year. "There are enough triggers for infrastructure stocks going forward because the growth has bottomed. Things will only improve. As interest rates come down, we will see there will be a revival in overall investment sentiment also," he elaborated.

Below is the edited transcript of Sandip Sabharwal’s interview with CNBC-TV18

Q: What is your sense in terms of the market and the way forward? Is there some amount of profit booking in line now?

A: I don’t think there is any major profit booking. Infosys’ movement by itself shows the kind of short positions, which were built up by hedge funds in Infosys because in the last few quarters, they used to short Infosys prior to results for money making.

I have not seen this kind of upmove in a largecap stock anytime in the last few years. We have seen it on the downside, but never on the upside. The IT index was one big drag on the market because there are enough triggers for interest rate sensitives this year.

We will see interest rates going down pretty strongly this year. We were unsure of the IT sector. Now, we are signs of stabilization in that sector also. If one has a view that the rupee could remain at current levels or even weaken from here then IT could be a good bet for this year also.

Q: Should we understand from the Infosys numbers that IT sector itself is perhaps better off than investor sentiment has allowed?

A: It seems so, because in a tough environment especially during US presidential elections and fiscal cliff talk issue, they are saying there are several large deals in the pipeline reflects the overall scenario. But we have another quarter of uncertainty in the US this quarter also. We could see some sort of postponement of decisions, but it does not look like spends are going off or going down.

Q: What about the IIP number itself? Do you think some kind of stability is returning? Would you get positive from here on in terms of growth?

A: Growth has clearly bottomed. How strongly it will come up is something you have to see. Everyone except the RBI seems to know that the economy is under stress and it needs some sort of monetary stimulus. Hopefully, we will see that happening from this month onwards.

However, I don’t see that the recovery will be very strong because of the way the capital goods segment has come off. It will take some time to revive. Also, today there were reports about two arms of the government NHAI and oil ministry are fighting in the Supreme Court, which doesn’t reflect very well.

Q: On the contrary would you not therefore buy the infra stocks. They are getting away from what is not very good margin bid. Now this will propel the government to give permissions faster. On both ways, doesn’t this event itself make you infra positive?

A: There are enough triggers for infrastructure stocks going forward because the growth has bottomed. Things will only improve. As interest rates come down, we will see there will be a revival in overall investment sentiment also.

But for non-interest rate sensitives like IT, there seems to be a scenario where they might not do well. Even that seems to be stabilizing. So, the overall market scenario looks to be pretty positive.

Q: What is your view on oil and gas which has been flip-flopping in terms of sectoral index in the past couple of trading sessions? ONGC is down 2.5%. What is your view on oil and gas in general and the news surrounding it?

A: Oil and gas is a contra sector for this year because ONGC is a clear beneficiary of the gas price deregulation. The overall oil sector also benefits if the government moves forward on reducing subsidies. There is enough value in lot of stocks.

A company like Hindustan Petroleum has a market cap equivalent to Jubilant Foodworks, which reflects the undervaluation. If some of impediments get removed, we could see the sector do very well.