Mood on India high; Bharti Infratel IPO a hit: Religare

Gautam Trivedi, MD and head of equities, Religare Capital Markets explains to CNBC-TV18 that the overseas investor-sentiment on India is high and estimates that the Bharti Infratel IPO will be a success.

Below is an edited transcript of the analysis on CNBC-TV18. Q: What did you sense from your road shows in Singapore and Hong Kong regarding the mood on India and will strong capital flows continue in 2013?
A: From the interaction with over 30 investors it is clear that the view on India is quite positive. Investors also expressed surprise in the manner India has performed this year to become the best-performing market in Asia outside of economies like Thailand and Philippines.
But a 24-percent return on the dollar is great in an environment when Asia, especially, China has been a big laggard. So, overall the mood is very positive for next year. There doubts about the concerns on the fate of FDI in retail in Parliament were also put to rest and its passage has now has been taken very positively. Overall, there is a very positive mood among investors in Asia right now. Q: What is the opinion regarding India-dedicated funds this year witnessing redemptions which is at odds with the kind of inflows? Do investors want to bet on the region or are they interested in long-term investments?
A: There aren't too many India-dedicated funds left, so I think there has been a redemption issue early on in the year and I am not sure if you are referring to anything that's happened recently.
But more important is the question of asset allocation towards India versus other markets. The impression I got from meetings last week is that due to the outperformance of India this year, there will an increase in allocation towards India starting January. So, I think that is clearly a positive. Q: Is this interest strong in the primary-market pipeline as well because many of the primary market issues have done quite well these last two months?
A: Yes, I think there is. There is clearly interest on seeing whether the divestment programme is going to be able to hit the target of Rs 30,000 crore and there remains strong interest overall in both the secondary and the primary market. There has been not revival of the huge inflows seen in 2006-2007 and in 2010 Asia.
The impression we got is that the big magnet for those huge inflows into Asia was China and not India. So, the day China turns, there will a return if those huge inflows into Asia. Will that cannibalise India? A lot of investors said that it would probably end up benefitting India even more. Q: Today is the day of reckoning for Bharti Infratel. What have you been advising investors on that issue and how do you think that will go?
A: We are fairly positive, not just on Bharti, but all the recent deals including National Mineral Development Corporation (NMDC), PC Jewellers. Credit Analysis and Research Limited (CARE) of course was a super success. I think it is positive, not just for the fact that a tower company is getting finally listed in India, but more importantly for Bharti itself. But overall, the mood is positive. The overall subscription is not great but a lot of investors will come in on the last day which is today. So, I think the issue should definitely sail-through. Q: Tactically, what is your portfolio positioning that you recommend for 2013- your key overweights and underweights?
A: We still like some of the consumer stocks that are not necessarily in the league of HUL and the ITC which have seen great runs and are now very expensive. But talking of expensive stocks, one stock that we still continue to like in the consumer space is United Spirits. We have had a 'buy' on it since the stock was at Rs 500.
Our analysts still think that this has the ability to go up another 50-80 percent. The management, Diageo, has downplayed a lot of the improvement in margins that is expected to occur soon. The management  believes it is going to happen over a longer period of maybe over five to eight years. But the fact that Mallya is now out of the company and has been replaced by a foreign owner who is determined to expand the company and cleanup the balance-sheet has seen as very positive by the market.
I don't think investors, specifically in United Spirits, would have any interest in booking profits. However there are signs of a strong momentum and a lot of interest in the stock in Asia.
We also like bank-stocks like YES Bank and the State Bank of India. Q: On United Spirits, will there be an upping of the open offer?
A: I don't know and I can’t comment on that. But clearly at the current price, the open offer may not necessarily be very successful. The management may resort to creeping acquisition over the next few years to increase its stake, but in some ways that does offer comfort that there is a new promoter to increase the stake and that should support the stock price. Q: Is there anything you prefer in real estate and infrastructure?
A: We like Jaiprakash because it seems to be making a serious effort to sell-off its cement business which, if it succeeds, will end up significantly reducing the level debt. Within the real estate sector, we have have a 'buy' on two stocks, Sobha and Prestige. But it is now time to look at underperformers like DLF which seems to be serious about selling assets and other properties. It has already sold its property in Mumbai. If this momentum continues, there will a return of significant interest into the real estate sector. Q: What about the Index? For investors looking at the Index for 2013, how much gain do you think it can offer over the next 12 months?
A: I think the Index could offer a 15-20 percent return over the next 12 months because FII interest remains extremely strong and the momentum in terms of reforms from the government. If the government reins-in spending, control the fisc and the private-sector’s capex returns, the index is headed for a very good run next year.