Avoid PSB, buy Hindalco in metal space: PN Vijay

Indian shares snapped a nine-day winning streak on Tuesday as traders opted for profit booking ahead of holiday. The 30-share BSE Sensex, which surged over 1200 points in previous nine sessions (due to FDI approvals, diesel price hike, Fed stimulus and favourable German's Constitutional ruling on ESM), fell 46.30 points to close at 18,496.01 that retreated from 14-month high.

Sudarshan Sukhani of s2analytics.com, says that we had advocated taking profits in the Nifty and that in retrospect seemed like a very good idea. Traders would have been chopped around, 20 points up, 20 points down. We are in an uptrend in a strongly bullish market and we don’t know, the markets should move up rather than down on the holiday when we won’t be trading. Some small long positions should be taken in anticipation of better prices on Friday and in the coming week. So take some small baby steps in the long direction in the plus direction again. Buy some Nifty calls or buy some futures, much less than the normal volume, but be long.”
PN Vijay of askpnvijay.com, says "that the mood in Delhi is reminiscent of 1991. If a deal is struck with Mamata and they (Govt) say, “Okay, we will relax the six cylinder cap. But it is for the states to carry it further." So if a formula or a compromise is struck on the number of LPG cylinders, then that would be fine for the market. Anyways, in about 24 hours, the cat will be out of the bag. Below is the edited transcript of PN Vijay interview to CNBC-TV18. Q: What's the mood in Delhi, any possibility of a rollback or from the day one you are hearing that’s it’s a done deal, not too much will be exacted by the TMC?
A: The mood in Delhi is very positive. The entire media community and the Congress are extremely upbeat. The noises from BSP and Samajwadi Party have been fairly muted and standard. The DMK, NCP, Ajit Singh and Omar Abdullah have always been great patrons of reform. It looks that the Congress is confident that even if Mamta pulls a carpet they have 273 members at their back.
Congress is working on the good old index of Opposition unity. The Congress has always played on a lack of unity among the Opposition parties, for example you cant imagine BSP and Samajwadi Party coming together to form a government similar is the case with DMK, AIDMK, and same with the Communist and Mamata.
I think some in the finance ministry are hopeful of doing a few more things. I don't know how they will do that but there may not be such things to effect the ire of Mamata Banerjee, in short the mood in Delhi is really reminiscent of 1991. Q: Even if there is a small adjustment in the LPG cylinder, which seems like it is doing the rounds, do you think there will be any setback on sentiment or is it too small to come in the way of what seems like very buoyant sentiment right now?
A: There could be a great relief. For example, if a deal is struck with Mamata and they (Govt) say, "Okay, we will relax the six cylinder cap. But it is for the states to carry it further." So if a formula or a compromise is struck on the number of LPG cylinders, then that would be fine for the market. Anyways, in about 24 hours, the cat will be out of the bag. Q: How do you read the huge move in public sector banks today, is it just that they have been out of the game for so long and playing a small game of catch up or do you think something fundamentally might change around?
A: I am not so gung-ho on PSU banks. I still put my extra money on the private banks. The PSU banks are very under-owned because everybody had cleaned their wallets or they all had a free fall. I still feel that the current quarter will be tough for the PSU banks, their NIMs should be good but there would be still issues on asset quality. They will improve later because big things like the power restructuring for example would help them a lot.
PSU banks may reflect some decent balance sheet toward the end of this financial year. but till that time this market is today buying high beta in some of PSU banks – put in that category, I continue to bet on an Axis Bank ICICI Bank where I have a much better call on the asset quality and all the banks would have a pretty good NIMs. Q: It looks like the flavour is changing at least for the moment from defensives to high beta. If you had to bark up that high beta tree what would be your highest comfort clusters?
A: Metals look good. Hindalco has just completed a financing pattern and the fundamentals looks strong and it started running up after touching an amazing low of Rs 100. LME prices of aluminum are pretty good and even copper has been going up. So if you look at the international scenario and growth coming back because of unleashing of liquidity by the FED and the ECB, I would say that instead of getting too carried away by domestic reform and everybody admits that domestically earnings are going to be tough for the next quarter. Hindalco amongst the base metals would be a good choice. Q: In last two days everything in high beta have gone up whether it is infrastructure, real estate – gone up 10-15% where would you use the opportunity of this rise to go away because the news flow still not going to improve for a while to come?
A: Clearly, real estate. Real estate follows much slower cycles and what is happening in India is a genuine over supply whichever way you look at it and stocks markets are so efficient intermediaries that the over supply etc get and the information flow and the channels, low transaction cost, lack of back money etc all that make price discovery very-very efficient in stock markets. But the real market, real economy real estate is struggling even in a strong market like Mumbai is struggling; for sometime Delhi has been struggling so I don’t see the pumpkin turning into a chariot like in fairy tales in real estate. I think it will be a long haul and you are chancing your arm if you put a lot of money into real estate. Compared to metals, PSU banks, auto and all are relatively much safer.