Check out: Angel Broking's views on SBI, Infy, Tata Motors

In an interview to CNBC-TV18, Phani Sekhar, fund manager, Angel Broking gave his views on infrastructure space, State Bank of India, Tata Motors and Infosys.

Also read: Brokerages bullish on JP Asso, IVRCL Infra, Lanco Infra Below is the edited transcript of his interview with CNBC-TV18's Anuj Sighal and Reema Tendulkar. Also watch the accompanying video. Q: Would is your view on infrastructure space? A: It has been a bit frustrating for the infrastructure bulls. But if you analyse what has been happening over the last two years, there is a pattern in this. You have contracts which have been beaten down because they did not have adequate visibility on their order books. And that was understandable. And this was true mainly for the non-road contractors, especially those associated with power equipment related to more to the capital goods industry. There one could understand that there was a visibility issue. One disturbing thing that we have started observing over the last two quarters is that even those which had strong order books to sustain growth for two-three years have started reporting cost overruns. This was something that was visible in companies like Punj Lloyd for the last two years. But over a period of time even larger companies started reporting this strength. And that in hindsight actually tells you that the battering of these infrastructure stocks was not without reason. Now the earnings downgrades have started and they are not trailing the valuations. These stocks look attractive on valuations. But looking at the current trend, they will get more attractive next quarter. But if are a medium to longer term investor, one would understand that there will be an end to this phase. The kind of earnings that many of these companies are reporting now do not justify either their networth or the kind of order books that they are holding. Over a period of time, once the new investment cycle begins, you would assume that these companies will be a bit more careful in the way they did. I guess that is the hope that many of the infrastructure bulls have to hold on to. Q: What is your call on State Bank of India? A: SBI, you should continuously think of accumulating around Rs 2,100 to Rs 2,000 levels. While the positive is that the net interest margins (NIMs) have improved to around 3.6% and the management has guided that it is going to remain in that range, but the worrying part, on the other hand, is that asset quality continues to worsen. We thought that after the Q4 provisions, the worst was over, but it does not seem to be. You are likely to see at least three-four quarters of higher provisions to come back to a net NPA ratio of 1.5% and maintain at that level. It actually tells you the extent of stress that SBI is facing on its asset portfolio. If the macro environment worsens from here and interest rates remain where they are for maybe six months or so, we are likely to see that SBI may languish at these levels and maybe under pressure. But the biggest catalyst will be if the macro environment eases and consequently the rates come down a little bit then SBI will be the biggest beneficiary. With NIMs at these levels, if asset quality stress reduces, then you are likely to see SBI report fairly strong growth of 25% to 30% in its bottom-line. So, on the balance, I would say that the investor can think of accumulating more on declines. _PAGEBREAK_ Q: What about Tata Motors? A: If you actually see the revival in Tata Motors for the last two years, a large part of it was lead by JLR, something on which the large part of the street was skeptical. And that was the big joker in the pack. If you actually look at JLR, we believe in the next one year or so, you can actually start seeing dip in volume growth for JLR for reasons that we all know. But I think the bad news does not end there. With the launch of Evoque, you are likely to see a large part of the R&D amortisation that will start flowing into the P&L. And that will further depress the earnings for JLR. So, you are likely to see a volume dip and top of that a significant increase in R&D amortisation. Can the Indian operations compensate for it? The answer again is not very encouraging because the India car franchise of Tata Motors has not offered hope for a long time. On top of that, CV is going through a cyclical downtime. I would say that the investor can focus on other rate sensitives namely banks in this kind of an environment. I think more promise lies there. Q: What is your call on Infosys now? A: Going forward, is there likely to be there huge underperformance from Infosys as compared to the overall market in relative or absolute terms? The answer is no. Infosys may not set the stands on fire for the next one year, but it is not likely to give you negative return or hugely underperformed. You saw what happened to a large number of midcap IT companies. Despite encouraging top-line, their bottom-line dragged because of taxation catching up to the normal rates. Infosys is already around 26% tax rate. So, you do not have any issues that you might otherwise have with companies like Wipro. Infosys is going around a transition in itself. So, for the next one year, its volume growth, in the worst case scenario, will be 3-4% lower than that of the industry growth. It might translate to a more tepid 13-15% kind of earnings growth as compared to a TCS earnings growth of 20-22%. But I do not think the world is going to be upside down. When the company would come out of that transition phase, I think there will be again two-three years of very good growth.