In an interview to CNBC-TV18 Krishna Kumar Karwa, MD, Emkay Global Financial Services shared his reading and outlook on the market and stocks across various sectors.
Given the current market scenario, one should buy stocks selectively from a medium-term perspective, he recommended. Karwa expects India to outperform other emerging markets because its gross domestic product (GDP) growth is much better than its peers. Also, prospects of a stable NDA government will lead the market higher, he added.
He suggests adopting a stock specific approach. He says investors looking to play the election theme can buy L&T and Thermax from the capital goods sector. He is also bullish on IT stocks likeWipro, Infosys and HCL Technologies.
Meanwhile, he doesn’t expect the Reserve Bank of India (RBI) to hike rates tomorrow.
Also Read: Are emerging markets on the brink of another crisis?
Below is the edited transcript of Krishna Kumar Karwa’s interview with Latha Venkatesh & Sonia Shenoy of CNBC-TV18.
Q: Will you buy into this fall?
A: There has been selloff globally in developed markets and many of the emerging market currencies are weakening. Even our currency has shown some initial sign of weakening on Friday. Also, our market is price to perfection. We have seen that whenever results have been slightly below expectations, there has been some selloff in various counters, but having said that the major event that, we are following global events now but the fact remains that expectations from the upcoming general election is very high. Selectively one should be looking to buy into stocks from medium-term perspective.
Q: How much of an importance would the election trigger play now? Will it take the market above that range that we have been speaking of 6,100 to 6,400? Do you think the pre-election fever; the possibility of Bharatiya Janata Party (BJP) led National Democratic Party (NDA) government coming to power. Does it have the ability to take the markets above the range?
A: Global events could play out; in the next 10-15 days if there are outflows etc, then that will pan out, but selective bottom fishing would come in. There are expectation both locally and globally of a positive outcome in the upcoming general election. Hopes of things improving post that in the economy per se, robust foreign institutional investors (FIIs) and foreign direct investment (FDI) inflow if there is a stable government will come into play. At lower levels there will be aggressive buying.
Q: The broad question is do you expect Indian market to be relative outperformer while the gash may come. At some point do you think the Indian market could u-turn faster? At what level are you a buyer or would you wait for lower levels?
A: I agree that among the emerging markets India stands out in terms of – though lower but still the gross domestic product (GDP) growth is much better than many of the other emerging markets. Initially, there are challenges as far as all emerging markets are concerned, but we would possibly be an outperformer among the emerging markets because of our own GDP growth and also upcoming elections and expectations related to that. We should outperform going forward and there will be stock specific opportunities, which the investors would be looking at.
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Q: What are your buys in the IT space?
A: We have been positive on Infosys and Wipro. These are the preferred picks in the sector, but having said that even HCL Technologies numbers has surprised positively and the stock continues to deliver robust returns. If you believe that the currency would be in this range then these stocks do offer good investment opportunities even at the current prices.
Q: Is the capital goods sector a good buy for long-term and what the stocks to buy in the capital goods sector?
A: If you are positive about the turnaround in the domestic economy per se then yes, capital goods sector is a sector to invest in - valuations being where they are. It is best to stick to the top two-three names in the sector whereby companies like Larsen and Toubro (L&T) or Thermax are the most resilient stock in the sector which you should be first investing in rather than going down the chain.
Q: How crucial is the RBI policy you think? Will a rate hike at this juncture seriously destabilise the market? What are you expecting and how will you trade markets before and after?
A: In the last two meetings RBI has always surprised the market and gone against broad expectations, but consumer price and wholesale price inflation has come off. We believe that it should be a status quo kind of an environment, but if there is a rate hike, that would be a negative surprise for the markets.
Q: So you expect him to be unpredictably predictable this time around. If that happens would you see a bit of a recovery in bank stocks? What is it for the markets? How long will the damage be if at all if there is a rate hike and how long will the positivity be if any if there is a status quo policy?
A: Frankly speaking within a day or two market goes back to its fundamental basis, whether the results season etc. starts coming into play. Having said that, as far as banking stocks are concerned, we have already seen that most of the new generation private banks results have come and they have not exactly been as gung-ho or as positive as was expected and we have seen the stock prices of many of them correcting. It looks like that the shine which was there on many of the new generation private banks seems to be coming out.
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