Any post-Budget sell off a good buying opportunity: Antique

Tiwari sees the imminent reduction in interest rates as the catalyst for growth to accelerate, and is bullish on the banking sector.

“There has been cautious commentary by some of a few of private sector banks. However this is an opportunity to buy because if one is looking to invest in banking stocks I should be looking for improved performance in the second half of this year and not in the recent quarter or the forthcoming one,” Tiwari said.

He is expecting aggregate earnings of Sensex companies to grow 18 percent in FY16.

Below is the transcript of Dhirendra Tiwari & Ashish Maheshwari’s interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18.

Latha: What is your sense about a more immediate trading call? Is there much of a pre Budget rally still left, do we go empathically above 9,000 you think pre Budget?

Maheshwari: The market is too sensitive with respect to the budget. Everyone is looking at the budget as a means to an end and a fair bit of positioning is already happening discounting a positive scenario post budget. So, may be going towards the budget we are slightly nervous but any sell off on account of negativity probably won't solve all the chaos that the economy is facing right now but that should be a huge buying opportunity. That is our broader view.

So to answer the question more precisely I would probably be a little muted instead of straight away adding to positions, I will stay light and use the budget to add long positions to the market.

Latha: What do you make of the entire range of consumption stocks? Whether it is pizzas or Jaguar or Land Rover the sales have not been coming where would you put your money?

Maheshwari: Let me take a step back and say I will back Governor Rajan's view that as a country we should, in the medium-term, we should not be happy with anything less than double digit growth. If stock prices were essentially to follow what the economy expects over the next two to three years I would say yes, a lot of consumers stories or lot of concepts are slightly over invested.

Profit booking over there creates a little bit of catastrophe on the stock prices. The moment you start looking at things with that underlying philosophy and multiples which can essentially reflect what can happen over two-three years I would still not be worried at these stock prices or these price levels. So, I come back saying that basket is definitely a little over invested by short-term players. Any knee-jerk reaction could see 10 percent being shaved off but that again to mind is a huge buying opportunity.

Latha: What is the sense you are getting? When I looked at the bank numbers yesterday 8 percent bad loans from Indian Overseas Bank (IOB), 6.25 percent from UCO Bank and then it was not very good even with a mighty bank like ICICI Bank. Are you really getting a sense that growth this going to come back in a quarter or two or even three?

Tiwari: If you look at the recent performance of the economy it has been rather improving. The industrial growth has not been negative for say about 4-5 months barring some hiccups. There has been some improvements in the overall gross domestic product (GDP) etc. So, what we are currently witnessing the ground being prepared for the growth and our opinion is that we are definitely looking for stronger growth this year. Based on the previous definition our growth expectation was about 6.5 percent GDP this year. So, there is about 100-125 basis points improvement in the economy. If we see continuation of reduction in interest rates that will provide some catalyst for growth to accelerate.

In terms of corporate earnings we are looking for about 18 percent earnings growth in FY16. This is an improvement over about 11-12 percent that we saw in FY14. So, things are improving challenges are there. However we are definitely much better than what we were in last couple of years.

Reema: Antique house call is positive on banks as well as non banking finance companies (NBFCs). Do you still expect the banks and the Bank Nifty to continue to carry forward the mantle of leadership despite the very weak earnings that we have seen?

Tiwari: Once again one would realise that this quarter was not the quarter where one would expecting very strong earnings growth. If you look at the performance of the banks the problem has been in public sector banks. We believe that the performance of public sector banks may continue to be slightly choppy given that non performing assets will continue to haunt them for may be couple of quarters or three quarters down the line.

Our expectation is that there is some pick up in the credit growth may be towards the later half of this year. Most of the private and good public sector banks are looking at improving margins. So my sense is that there would be a run down in the stock prices if the performance is bad which is more restricted to some of the PSU banks. There has been cautious commentary by some of a few of private sector banks. However this is an opportunity to buy because if I am looking for investing in to banking stocks I should be looking for improved performance second half this year and not in the recent quarter or the quarter which is coming.