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Last Updated : Sep 17, 2012 06:26 PM IST | Source: CNBC-TV18

Ride with pvt banks, hunt with PSUs: Experts

Market experts Sudarshan Sukhani of s2analytics.com and Tushar Pradhan, CIO, HSBC AMC suggest investors on CNBC-TV18 to maintain long positions on the bank Nifty and look to buy banks whenever they come down on corrections.


Sudarshan Sukhani of s2analytics.com recommended profit-taking and long positions when the market opened with a gap-up. He explains to CNBC-18 the nature of the market after the Nifty picked up a bit from its low point.


"Yes, the choppiness will continue but the broad view is that the Nifty is likely to consolidate and even correct on the downside. My suggestion is to maintain long positions on the bank Nifty and look to buy bank-stocks whenever they come down on corrections, remains valid."


Tushar Pradhan, CIO, HSBC AMC supports this view and suggests investors to remain with private sector banks and seek selective exposure in PSU banks.


Below is a transcript of Tushar Pradhan's analysis on CNBC-TV18.


Q: Do you expect to see new highs in the market by the end of the year or do you think that a lot more needs to be done by the government?


A: Predicting the market is fraught with risk, so I will avoid that. But what was expected for a long time has all come within a short span of a week. A key concern, from my point of view, is if any of these long-term measures will be able to sustain the sentiment in the near-term. I think the market will have to wait for more cues before it sees any reason to cheer.


Q: While the market is perhaps consolidating and waiting for more cues, what's the portfolio shift that you recommend?


A: I think there is going to be a two-tier market. There has been a lot of risk aversion in the last two-to-three months and the defensive stocks and free cash-flow generating companies command a premium unseen in their own valuations. So obviously, there is a lot of overvaluation on that side.


On the other hand, cyclical, industrial and material companies are trading at much below their average multiples over the last five or six years. So, a call has to be taken whether an investor wants to take a risk because obviously valuations are in favour of that or whether the investor wants to keep his aces close to his chest and continue in the defensive stocks.


Going forward, it needs to seen if the government’s initiatives really play out and growth is restored. If the return to growth is something that someone wants to bet on, clearly, cylical and cheaper industrial stocks is the way to go. However, the market does not believe that such an environment is upon us. So, at the moment the investor is left with the choice of believing in growth or prepare for reduced growth expectations for the next year.


_PAGEBREAK_


Q: What are you recommending investors? If additional policy measures come in which are the sectors do you think will benefit the most?


A: To set the record straight, we don't recommend sectors or anything of that nature. We do run mutual fund portfolios for the long-term. The Indian equity market is at a very early stage of a long growth period. However, the measures are not well-timed as we would like them to be.


We don't really rely on broad sector calls. If you think that it will take a much longer time for the economy to recover, I think all of these sectors will still remain pretty much depressed for some time before the actual momentum begins.


Q: What’s the call on oil and gas companies now after the announcement of the reforms?


A: For the interim, it appears as if the government momentum seems to be favour changing the environment to suit the oil marketing companies for now. However, the impact of these measures remains to be seen by the end of the year. So, the uncertainty in the oil sector will continue. I don’t think we can look at these companies purely on the valuations that they are trading at. But if the reform momentum continues, I think definitely the outlook on the sector will look pretty good.


Q: What is your call on banks and how one should approach both private sector as well PSU banks?


A: I think the two-tier nature of the markets seems to have rubbed its effect on the banking sector as well. Certain private sector banks have begun to trade at significant valuation premiums. At the same time, a large majority of public sector banks are trading at pretty attractive price-to-book valuation. So, one cannot take an even-handed view on this sector.


Though asset quality concerns have divided the outlook, it would be best to remain with the more secure private sector banks and take selective exposure with a few public sector banks.



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First Published on Sep 17, 2012 06:11 pm
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