See 4500 on Nifty in 8-12 months: Prabhudas Lilladher

Due to the volatile environment around the globe and in India, Dilip Bhat of Prabhudas Lilladher expects the Nifty to fall to 4500 levels by December.

In an interview to CNBC-TV18, Bhat said “There could be some bear market rallies, but by and large I think it will be a bearish outlook.” He further adds that investors should be picky while investing in equities over the next 8-12 months.

For the near-term, Bhat says hopes of a pullback rally are evaporating. “In case there is a rally, I think we all would look for when to get out, that would be at the topmost in the mind,” he added.

With this view, Bhat advices staggered investments over the next 12-18 months for high returns. “Coming to specific stocks, it would of course have to be a mix of aggressive, proactive plus a lot of defensive,” he added.

Ranbaxy is at the top of his buy list, closely followed by defensive names Infosys and TCS.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Haven’t had too much luck in terms of a recovery barring yesterday’s small pullback. What’s your sense of where this market is breaking down to in terms of levels?

A: I think we can see that hopes are fast evaporating of any rally which a lot of people, including me, were expecting. In case there is a rally, I think we all would look for when to get out, that would be at the topmost in the mind.

On a longer term perspective, the things are unfolding, whether it is Greece, Europe or even India where the things are looking pretty muted, I think it’s going to be a tough time for the market. I think the market will probably continue to languish around these levels.

On the lower side, by December or something we can see a level of 4500. There could be some bear market rallies, but by and large I think it will be a bearish outlook. It will be kind of a pick and choose market which possibly will continue for next 8-12 months.

Q: From infrastructure the only that’s seen a positive response is L&T. Any thoughts on that stock and how are you guys approaching it?

A: Well as far as L&T is concerned, it will be largely determined by the extent of order inflows that they will get in. If they are expecting around 15% growth, I fear that it is on the optimistic side. It will be very difficult to meet unless they are banking on the overseas orders, which perhaps then can be possible. But given the state of the things, I think that looks a bit difficult.

I think we will probably continue to have very muted order inflow numbers even for the current year. Maybe the turnover and the execution would be good, so the bottom-line growth could be around 18-20% for FY12-13. So from the current level, I would still lookout for time to buy and not be in a hurry to really rush and buy around the current levels.

Q: What is your own observations or what do you hear from peers in term of what’s happening with the retail HNI side because two IPOs now have had to pullback because of how poor the market response has been? What exactly are they doing in the secondary market?

A: Despite midcaps being available at such cheap valuations, nobody is prepared to even notice them. So, it’s not very surprising that some of the new issues, which probably do fall in those midcap categories, don’t find any decent attraction.

I think that probably will remain the bottom-line for some more time to come. I don’t think that the new issues are a great opportunity for any of the investors given the fact that you have plenty of opportunities in the secondary market. So I think the high net worth individuals (HNIs) also are waiting on the sidelines with a pick and choose kind of approach.

Q: What do you do with some of the retail stories like Pantaloon etc.?

A: They continue to be capital hungry, even with capital not available, they continue to consume a lot of cash and on the performance front none of these are really showing great performance. I don’t think it is time even to look at some of these stocks, even from the current levels, so one should really wait and watch.

Q: What would you set out as a buy list now given what you have seen in terms of earnings or what your call is on the market? What’s the best way to approach it? Is it a defensive stance? Are you changing things around in terms of specific stocks a lot?

A: On a macro basis, I think next 12-18 months are going to be pretty challenging. The market is probably could continue to drift lower. So I think if you are trying to invest Rs 100, I would spread it out over next 12-18 months is what would look at. Secondly, if I were to come to very specific stocks, I think it would of course be a mix of aggressive, proactive plus a lot of defensive.

In the proactive, Ranbaxy is one which we like a lot. I think that’s the stock which can go places over next 12-18 months. We think that’s a stock which can really more than double up from the current levels and that has everything going for them at the moment with the problems behind them. On the defensive side it would still be the likes of Infosys which one should buy or maybe a TCS from the current levels.