Here is what PLiladhar is advising on ITC, Gail, Wipro

After ITC reported a net profit rise of 18 percent to Rs 1,891crore for the first quarter, Dilip Bhat, joint MD, Prabhudas Lilladher recommends buying the stock if it falls 7-8 percent lower from its current levels.

Giving his reaction to all the day's top results on CNBC-TV18, Bhat says, Gail has hit the bottom and may become a defensive buy for sometime to come. He suggests investing in the stock for a slightly longer term. With regards to Bank Nifty, Bhat does not think that banks are done with. "At lower levels banks would become interesting sector to look at. So, I would wait for some more correction to happen and possibly pick and choose this particular sector,” he adds. In case of Wipro that will post its earnings tomorrow, Bhat thinks that given the overall situation of the rupee depreciation which will help Wipro in the bottomline, but whatever changes they have made are slowly bearing fruits. He therefore, says on a long term basis Wipro would still qualify as a good candidate to invest in. Below is the verbatim transcript of Dilip Bhat's interview on CNBC-TV18 Q: ITC down 5 percent, the management is able to maintain margins but the revenue decline has surprised. What is your view on the stock? A: In the last two-three years, 80 percent of the incremental profit always comes from a very nominal increase in sales of cigarettes and that trend still continues but volume continues to disappoint as far as cigarettes are concerned. However, as far as other businesses are concerned whether its paper business or its hotel business, both of them have disappointed quite a bit and there is little hope that they will turnaround quickly. Coming to fast moving consumer goods (FMCG) business, it has been as per the trend. Therefore, ITC continues to be a stock where one would still look at when to buy even if there is some kind of a correction, people will still look to buy, but the question is when. Maybe 7-8 percent lower, I would be a buyer in that. Q: What would be your view on the oil and gas space especially after Gail's numbers? A: This under recovery is something which not most of us have any hold on. There are 2-3 things happening, maybe the gas price hike is going to hit them but they are also increasing the overall capacity of the petrochemical business. From next year onwards, if this under recovery really stops, net-net whatever they show in this year would be the bottom. So, this is what the market would be rightly discounting, that is a time when Gail would start showing a sustainable growth. If Reliance is able to step up its gas production, that will also help Gail. So, Gail has hit the bottom and it may become a defensive buy for sometime to come and possibly a good investment candidate over a slightly longer term. Q: How are you approaching the next couple of months? Do you think the underperformance that the Bank Nifty has showcased in the last one month will continue? A: The volatility is here to stay whether it is Bank Nifty or the overall index. Therefore, whatever RBI has taken, if the finance ministry believes they are short-term steps and will be temporary so it will lead to a lot of volatile price movements. So, things are stacked up against most of the banks particularly those private sector banks because the short-term rates will go up as the liquidity gets tightened. So, I would not think that banks are done with but at lower levels they would become interesting sector to look at. So, I would wait for some more correction to happen and possibly pick and choose this particular sector. _PAGEBREAK_ Q: How would you be placed on the IT space or rather Wipro going into its earnings tomorrow? A: As far as Wipro is concerned, it is one stock we like. Even if it disappoints in a quarter or two, one can look at it. Given the rupee depreciation, it will help Wipro in the bottomline but net-net whatever changes they have made, is slowly bearing fruits. From a long term perspective, Wipro would still qualify as a good candidate to invest in. Q: Would you have a view in terms of a lot of non-banking financial company (NBFCs) that have been in focus because of wholesale funding going up and also the downgrade for IDFC on Wednesday as well? A: The steps that have been taken will lead to an increase in the borrowing costs in the short run. So, the wholesale borrowers like most of the NBFCs have taken it on the chin. M&M Finance in particular is one stock that we should certainly keep a watch on. It is a stock to buy for the long term and even from a defensive perspective, but otherwise I would also go in for something like Bajaj Finserv. They have been doing pretty well in their bottomline whether its RoEs or even NII growth and therefore, that is another stock that we like and appears to be good. Q: How do you approach the two stocks that have been bashed out of shape today? One of them is Ambuja Cements, how do you approach that stock now? A: It is a question of de-rating; it is a question of corporate governance. The Holcim management wanted some money desperately, they took something out of royalty and structured this in a way so that they could take out Rs 3,500 crore. So, it is not the end of it, these companies will continue to generate serious amount of free cash in the future So, if they have taken the money out of Ambuja, will they do the same with ACC, may not be but the doubt remains. And like what happens with Indian management when some of the stocks get de-rated, these two companies should also suffer the same fate because they have done something which is a very serious corporate governance issue. Q: Friday is a big day for earnings as there will be heavyweights like PNB, HUL posting their numbers. What about HUL because today that stock is down quite a bit? Unilever mentioned that they missed their sales target because of slowdown in emerging markets. Do you fear that HUL may throw up some chinks in its results this time? A: Even in the last quarter they have been warning that the overall growth has been very muted and could get reflected even in this particular results. So, I don’t think we are expecting anything great rather after the distribution of the big dividend that they did last time, other income will also taper off and even the income tax rate will go up for them. We are expecting the results to be muted and sober this time. So, in a way I don’t think it will disappoint. But over the next 2-3 years, are we still going to see a solid growth emerging? So, that would define the way HUL is going to move.

Q: What is the sense you are getting as we head into the August series? Do you think this market has potential to get back all the way down? A: I don’t think to the yearly lows that we have seen. The markets will give-in in a big way but there are too many things at play at the moment and very complicated. You do not know which factor really dominates at what time and then everybody just talks about that for a while. But it is also to do with the fact that the FII flows have been very erratic and have really tapered off. In the absence of their support, markets still remain pretty vulnerable. So, the downside, I don’t think it can be below 5500 or 5600. Q: PNB comes outs with its numbers tomorrow. It has been stabilising in the past quarter at least in terms of numbers. What would your expectation be from that bank in particular? A: In terms of slippages there will be a little more bad news for the bank. In terms of the NII growth and in terms of the pre-provisioning of operating profit growth, they will be very sober considering that in the overall environment we have not seen any serious credit growth in the system as such. But I would really watch out for this bank because it has corrected seriously and may be around these levels. There may be some small downside, but I would still look to buy this particular bank at a suitable time.