Gautam Sinha Roy, VP - equity strategy and product, Motilal Oswal Securities says, in an interview to CNBC-TV18, suggests investors to be wary of defensives and bet on bank-stocks, TCS and ITC.
Long-term investors are advised to cautious while taking bets on defensive sectors as the valuation of many of the stocks is overstretched, says Gautam Sinha Roy, VP - equity strategy and product, Motilal Oswal Securities.
In an interview to CNBC-TV18, Gautam Sinha Roy suggest investors to bet on bank-stocks which fell in reaction to announcements from the RBI, on TCS after strong results declared by Infosys and on ITC from the FMCG pack on expectation of strong results.
Below is the edited transcript of the interview on CNBC-TV18
Q: Hindustan Unilever's (HUL) move of 11 percent is mind-boggling. What is your view on the stock?
A: Valuations have been on the rise for sometime in the defensive sectors, especially in the quality stocks such as HUL.
But the valuation does not offer comfort at current prices. So, investors should be careful. But clearly there is momentum — be it frontline consumer stocks, frontline pharma stocks, even some of the better performing IT stocks. Though investors could ride the momentum in these sectors in the near-term, the valuations on many of these stocks are definitely overstretched. Hence, I caution the long-term investors invested in these sectors.
Q: Would you suggest entry into banks like Kotak Mahindra and Yes Bank that have a high percentage of bulk deposits based on their reaction to the measures announced by the Reserve Bank of India (RBI)?
A: The reaction was more to do with the fact that the RBI's announcement came out of the blue. There is a lot of uncertainty among investors regarding the impact on individual banks when the sentiment on cyclical sectors in general is negative.
So, this offers a very good opportunity for investors to time to build long-term positions into banks like Yes Bank, Kotak Mahindra Bank which are very high quality private banking franchises with great growth prospects.
Q: What do you expect from Tata Consultancy Services (TCS) which is to declare earnings on Thursday?
A: After Infosys, the market expects a positive surprise from the IT pack. So, if TCS declares strong growth in volume and maintains a strong guidance for the coming year, it would be taken as a big positive.
Given the backdrop of a depreciating rupee, any additional earning would also act as triggers for the stock. The stock will strongly react to results that are not too disappointing in terms of volume growth and strong guidance for the full year. Though the stock is one of the most expensive, it is a good be since the sector is in favour.
A: I would like not to pick anything at this level. But if I have to, then it will be ITC given the backdrop of strong results expected. So, if there has to be one pick, it will be ITC.