Prabhudas Lilladher says, start investing; picks 2 sectors

Investor should begin investing irrespective of what happens in the near-term, Sandip Sabharwal of Prabhudas Lilladher told CNBC-TV18 in an interview. However, he advised investors to not take much leveraged positions.

Talking about the ADAG pack, especially Reliance Capital, Sabharwal feels that the group is out of the investment radar of most serious long-term investors. He said, "The group needs to gain confidence of investors over a period of time."

According to Sabharwal, the best performing sector would be banking sectors, especially private sector banks. He believes that the private sector banks are relatively better placed than PSU because they have decent capital adequacy ratios. He also mentioned that the capital goods space sector would be his second bet in terms of valuations.

He further stated that he is extremely negative on steel and hence, the commodities and metals space should be completely avoided.

Here is the edited transcript of his interview. Also watch the accompanying video.

Q: Do you think that 4,700 levels has become a fairly sacred bottom till the end of the current year?

A: The panic bottom, which we made at around 4,700 levels, holds for this year. If Greece ends up defaulting, then all bets are off and we could see another 10% downside in them markets. If we consider that, that eventuality will not happen.

There are a lot of indicators for a bottom formation like record outflows out of equity funds, people going into cash and not willing to take counterparty risk, VIX indexes trading at extremely overbought positions in Europe and the US, and German bonds and US 10-year bonds trading at extremely overbought zone. A lot of indicators should have formed a panic bottom. However, the event should not happen. If that does not happen, we are safe for this year.

Q: Is it time to take off the cash and begin investments?

A: Investor should begin investing irrespective of what happens in the near-term. There is huge value across the board, be it largecaps and midcaps in the market. However, investor should not take too much of leverage positions. It is a very difficult market for the traders.

When investors turn into traders, they get disappointed with the markets. The key is to buy into the right kind of stocks and just hold on. Over the next one year, the returns would be very strong.

Q: The ADAG pack with Reliance Capital has been in news today, leading with gains of around 5%. However, they have seen quite a downfall in terms of a year-to-date (YTD) scenario. What is your perspective in terms of trading or entering the entire group or the Anil Ambani stocks, especially Reliance Capital?

A: The group has gone out of the investment radar of most serious long-term investors because the businesses have not been doing extremely well and most of the balance sheets across businesses have been deleveraged.

One company of the Reliance Infra was well placed, but some of its projects related to its subsidiary Reliance Power got into issues related to fuel costs going up.

The group needs to gain confidence of investors over a period of time. Only then, we can see serious long-term investors invest into the group. A secular up move will be formed only after that.

Q: You mentioned that this would be a good time for investors to pickup good stocks, stay with them and expect one year gains. Would the banking sector be a good entry point now? What would be the best sector that you would put your finger on?

A: The best sector would be banking, especially private sector banks, because PSU banks have some issues with the non-performing assets. They would have to deal with them over the next couple of years.

However, private sector banks are relatively better placed because they have decent capital adequacy ratios. To that extent, they can grow as interest rates and liquidity in the system eases off over the next one year. The private sector banks are better placed.

The second sector I would bet on in terms of valuations is capital goods. Here, the sector was severely downgraded and now, the valuations are very cheap.

Although in the immediate term, we don