Choppiness in mkt to stay for 2 qtrs; like autos: Pioneer

Q: What do you make of this recent bout of volatility today after the kind of run we saw over the last two days?

A: It was more or less bound to happen because we have run out of triggers. The next trigger is either going to be the second leg of the rate cut or the number flow which will be an extended period. Because the year-end number flow generally takes a long time to hit the market over an extended period of time so we do not have any triggers there.

The entire rally which was fueled by an unprecedented capital flow towards India is also seemingly having some question marks in the short to medium-term. That is a combination of the two which is ensuring this kind of choppiness in the market.

However, at the current juncture there could be a smart bounce back happening because the capital flows towards India are not going to stop. It may have slowed down in the shorter-term but it is not going to stop and you could see market showing buoyancy. However, on longer-term basis this kind of choppiness is going to be a part and parcel of our life for at least 2 more quarters.

Q: The entire insurance space is buzzing along with PSU banks or even private financials for that matter but ICICI Bank, HDFC all of these stocks are higher. Do you see any further re-rating in the insurance space?

A: Going by the old adage buy on expectations and sell on news, people were expecting some kind of a drawing board scenario and went through the numbers trying to figure out how it would get a USD 5 or USD 7 billion valuation for that insurance subsidiary.

I think most of it would have got absorbed in the first 15 minutes of the trade today. However, the larger guys who have got big players could be in for somewhat second round of re-rating more to do with that business aspect rather than sentiment aspect over the next few months.

Banking Index by and large could remain stable compared to what other indices are going to do because it is an off sided index with few large players making a disproportionate weightage. They are the ones who are going to benefit from the insurance news. So money flow towards them will not add that is why the Banking, Financial services and Insurance (BFSI) sector could remain stable in the few months to come. 

Q: Is there anything you like in oil and gas?

A: For last 5-6 years everybody has been saying something will come, some loosening of norms will happen. The subsidy sharing will change and of course we have got a gift of crude sliding by almost 60 percent from the peak. However, has it changed anything on the operational side for most of these companies, we do not know.

We will all be back to the drawing roads on the exploration company and on the oil marketing companies again will all be scratching our heads two quarters down the line as to which way it is going to swing on the earning front.

So this is one sector which will be traders delight but it will be a structural uptrend from the current level because at less than USD 60 what you have got to lose is factoring in all the works at the current juncture you cannot say that. It will be more of news driven factors that will influence the price movement rather than anything else.

Q: Can you tell us about the telecom space? If you have a view on Bharti Airtel, which is now up around 14 percent week-to-date and is preferred by most of the brokerages that look at it? How much of an over hang will be removed for Bharti Airtel once the auctions are completed?

A: If you go by the price action today and the auction figures that are going to come, there will be quite a long time before this company becomes free cash flow positive. That discounting is moving towards a zone where people talk that this is a consumer facing industry and most likely could be the next fast-moving consumer goods (FMCG) type of company or business-to-consumer (B2C) type of companies.

However, most of those other companies have got free cash flow generation ability and here you have no clue when free cash flow generation will happen and also the debt of this company is not small. If you look at the top player the debt could be as big as what a steel player or an oil player would be having.

You have seen them rallying in the last few weeks and the auction figures could give some kind of a solace to all but it is going to be some time before they become comparable to FMCG in true sense. So it is a trade, it is panning out, trade when the going is good but I do not think there are going to be structural uptrend there.

Disclosures: I do not think I have spoken about any stocks but we broke for the living so we can be deemed to have vested interest in most of our recommendations.