Mkt caught in range; bet on private-sector banks: Experts

Sudarshan Sukhani of s2analytics.com explains to CNBC-TV18 that the the market by and large is within the range that it has been stuck in for so long. "There was a tradable decline and intraday traders should have made at least some money today. Though the market opened by broadly being on just one side down, that somehow turned. But the market is still in that dreaded trading range."

"Nothing has changed. Yesterday it went up, today it came down, but it has not breached any levels. So to the extent that the market has not broken support at resistance levels, nothing new has emerged from today's market action. For all we know, Monday we could start from today’s level and then land up above 5,700."
Meanwhile, Dipan Mehta, member, BSE and NSE advises investors to hold on to HUL shares and bet on private sector banks as funding is visible and debt is available at reasonable valuations. Below is an edited transcript of Dipan Mehta's analysis on
CNBC-TV18 Q: What do you think of HUL and how you would approach the stock given the lofty valuations that it is sitting on?
A: Though the stock has been a phenomenal outperformer over the past several months, the market's disappointment on the fall in income has been reflected in the stock price. But from a long-term investor point of view, HUL still deserves to be a part of the portfolio and such minor variations in quarterly performances are to be expected.
These are not debt instruments which will give the perfect return q-o-q, these are companies in the real world which are facing several challenges and opportunities as well. So, although the management sounds confident, investors have to assume that it’s entering into a phase of slightly slower growth.
Also, I think the base effect seems to be catching up which needs to be factored in. But nonetheless, it’s a great company and investors with HUL shares should remain invested. But I think fresh investments or increasing exposure could be put off by maybe two-to-three months before examining one more quarterly result and then assess if there is any further return expected if the stock will be a market performer. Q: What is your view on PNB which is been quite a disappointment along with IOB which disappointed in terms of asset quality? How would you approach the PSU-bank segment in terms of asset quality at this point?
A: I think we have broadly been underweight-to-nil in the PSU banks and I think these results kind of only build a conviction that in PSU banks one needs to be underweight or have a limited exposure. We have seen a broad spectrum of banking results and it is clear why the street favours private sector banks and despite PSU banks having much lower valuations. The problem with public sector banks is that though the net interest margins, the net interest income and the expenses all are stable, it is difficult to estimate the provisioning, the gross NPAs and the net NPAs.
By and large, I think in a market like this, investors are best off trying to invest in companies where the funding is visible and debt is available at reasonable valuations and that’s what, I think, the private sector banks are offering. So, I would say that most of the exposure or the weightage in a portfolio should be for private sector banks.
If PSU-bank stocks have to turn lucrative, the economy needs to look up, the GDP growth rate has to increase and the entire NPA cycle has to turn around before PSU banks really start outperforming their private sector counterparts.