Mkt holds surprise; 2013 to build up for bash in '14: CIMB

Devesh Kumar, head-India, CIMB explains on CNBC-TV18 that there could be some more upside in the market before the results season begins in early January. He adds that next year could be period of domestic reconstruction and global stabilisation and establish the required environment for an economic boom in 2014.

Below is an edited transcript of the analysis on CNBC-TV18 Q: What do you see between now and the end of the year? Any possibility of more upside?
A: I think that there could be some more upside before the results season which begins early January. Although the outlook at policy level is changing, there is lot of stress at the grassroots. So corporate earnings may not support the euphoria that is being built up in the market at this point of time. Therefore we feel that market will be range-bound and though most of upside has been registered, there could be some surprises in the results season. Q: What does it look like, 6,000 and then a sharpish knock for the market come January or is there a different range that you think the market will probably work with even through the next few months?
A: I feel that market could trade between 6,300-6,400 and 5,300-5,400, that would be the band in the near-term. The reason being 2013 is going to be a year where there will be reconstruction across the board including on the policy front although the flow of positive developments would be slow.
Globally, the US and Europe will also stabilise during 2013 and therefore 2013 will be a build-up to good time in 2014. So, we are positive on market for 2013-2014. I think the worst is behind us and from hereon there will be improvement. It is heartening to observe on policy front at least a few issues are being debated and couple of the Bills are sailing through. Q: What is your take on the primary market offerings which are open right now - Bharti Infratel, CARE, and PC Jewellers followed by NMDC and NTPC ?
A: As far as the primary market is concerned, they are good quality issues. There will be appetite if they are offered at the right valuation and I think a few will sail through. So, that is what is going to keep the secondary markets range-bound. It is very interesting to note that most of the global equity capital market (ECM) activity is now in Asia and last year, of the total top 10 global ECM issues, around 7 were from Asia, chiefly from the Association of Southeast Asian Nations (ASEAN) region.
So I think in India if the positive situation builds up then there will be support for these issues, but it does not mean that all of them will sail through. We have information that the pipeline is very robust and a lot of entities are waiting to come out with issues if supported by the market. Q: Speaking of earnings, there has been a lot of caution about the IT space. Do you think the results and guidance might disappoint in January?
A: We feel that results will be a mixed bag. On the consumer side they may probably be in line, but we are more worried about the manufacturing and infrastructure side where the playing field is not very conducive and is full of uncertainty. Q: What do you hear from your colleagues abroad though in terms of money flowing into the primary market? Is that where investors are more interested? Are you hearing of India-specific funds being raised for next year?
A: We have not seen much of India-specific funds being raised, but on Asia, investors are positive and with India a part of Asia, there will be a pool available for investment in India on primary issues. Earlier, the valuation expectation in primary issues used to be very huge. Now we find that a few are sensibly priced and wherever there are such issues,  I think investors will be interested. But investors are cautious but optimistic with elections scheduled in 2014. Q: How would you approach the banks now especially that the PSU banks which have been ignored for most of the year?
A: We feel that for the banking sector there could be two more quarters of investor-caution. Overall, for the next two quarters, in terms of stress on asset quality, PSU banks will not be favourable for the next two quarters. Q: What are your top overweights and underweights as you look forward into 2013?
A: In 2012-13, it is going to be mostly stock-specific in each of the sectors. But if one has to reduce weight, then I think in technology and consumer FMCG gradually investors should start reducing weight.
Investors can cautiously increase weight on infrastructure and power where we feel the focus of reform will be.