The Indian market is positively poised right now and there is no need to worry about global weakness. That’s the word coming in from Ajay Srivastava of Dimensions Consulting. Srivastava feels the Indian market remains well-balanced with low volatility and sees a pre-election rally in the offing. The next government will solve growth issues, he says. “We were always a buyer in the market,” he told CNBC-TV18’s Latha Ventakesh and Sonia Shenoy in an interview.His advice to investors right now is to buy midcap stocks. He has a buy on YES Bank, Amara Raja Batteries and Fortis Healthcare. “We think Fortis could touch Rs 150-180 a share in the next 24 months,” he says.He also advocates buying Ranbaxy at current levels despite the latest US FDA row.
Below is the verbatim transcript of Ajay Srivastava's interview with Sonia Shenoy and Latha Venktatesh on CNBC-TV18.
Sonia: Today we have got some trepidation from the global screen. Do you think that could be a bit of an overhang at least in the first part of 2014 on Indian markets?
A: I think Indian markets are looking nice, comfortable in a very nice zone if you ask me although the market is at historic highs or almost close to it, no euphoria. The buying has been sensible. The correct stocks have been bought into. We are anyway a small part of the international game by and large, but I do not think we have got too much to worry from the international side. If there are any worries it will only come in the domestic side on the political front. I think economically, financially, business-wise it is like a kind of a stasis. It is like a suspended animation going on right now in the economy where everybody is comfortable where they are. Nobody is growing very much, nobody is competing hard. So from a stock market perspective it is a pretty nice place to be, because to an extent the volatility has also gone from the system so you can plan your portfolios well and do it. Of course from a trader's perspective there are opportunities, but not as many as one would like to have.
Latha: Do you think that a pre-election rally in the Indian market will materialise?
A: I think so. You can very clearly see the votes are polarising towards a political party, leadership and issues on development, issues on corruption are coming to the fore. It augers extremely well for the new government because it paves the way for India to be liberalised without sacrificing inclusive growth. So yes we are prepping ourselves for a pre-election rally. It might come much before the election even gets announced.
Sonia: So you would not be worried about the market's pace getting hindered because of the possibility of a hung parliament? The Aam Aadmi Party (AAP) economic policies are being questioned quite a bit, so you would not be worried about a fractured mandate?
A: I do not think so, AAP hasn’t declared its economic policy so far. If there is a one point agenda it is to root out corruption which you will all agree is the best thing possible for this country. If you take out the corruption element we will not have a fiscal deficit. Look at the economics of what is going to play out today. Most of the places we are seeing that the governments are not able to spend money. I am sitting in Haryana and Gurgaon where the municipal corporation is saying we do not have ways to spend money. Have you ever heard of it in the history of India? I think there is a lot of positivity to it.
Number two, look at the economic policies of everybody. It is the same. You can quibble about FDI in retail as one little thing but by and large what is everybody saying that we want more production, we want liberalisation, but what they do not want, what we all question is crony capitalism. We do not want corruption. So I do not see as a stock market investor I see all political parties in India are now aligned literally in the same platform saying growth is the most important thing in this country.
Latha: How much buying would you see? You agreed that a pre-election rally is possible. We have been testing this 6363 and recoiling so often. Do you think a dash is there beyond it and even at current levels you are a buyer?
A: I am always a buyer in the market. I sometimes short when I do not like the stock, sometime sentimentally, sometime financial logic speaking. Having said that we have to look beyond the index. The index has very few stocks we can buy into. If you have got IT portfolio now you are looking at the last 20 percent returns coming in the next year or so. You could have a Larsen and Toubro (L&T) which could have been an odd favourite to buy into because of this West Asia order book that they have and I think in a matter of two years they will be less dependent on India than West Asia. In the banking sector, HDFC has reached a point of slumbering, so you will not want to buy it. If you look at the index stocks there are very few stocks you want to buy into. You step away from the index there are hundreds of stocks. You can see phenomenally good stories that are playing out, returns have been good. You can get 20-30 percent return on those stocks. So I would still say to investors look beyond the index and look at so many good stocks at various values which are good enough to buy at this time and keep for a six months to a year rather than just worrying about the index levels.
Latha: The stock of the moment is Ranbaxy Laboratories. Is Ranbaxy a falling knife or should I buy Ranbaxy at some point?
A: In the morning my trader took a call to buy this share instead of sell - to be honest, so as a disclosure we went long in the morning on this share on a pure trading platform. At a valuation of roughly close to about Rs 14,000 crore one would tend to believe that it has got serious value there and too much of it has been made out in terms of what the USFDA problems are. They are not small problems, let us be honest about it, but I think at the point of time a valuation of Rs 14,000 crore one would tend to believe that you are on the positive side of the cycle, not on the negative side. They have got consumer brands. They have got the domestic Indian market. You cut out the international operation for time being. Let us assume it becomes zero.
It has got a very strong domestic franchise, very profitable franchise. I was an advisor to this company for a long time and let me tell you if you really cut out the international operations the domestic is very, very profitable and the local brands are highly profitable and growing very well. So at Rs 14,000 crore market cap you would tend to ignore a lot of stuff and say okay now there is time to go long. Maybe the valuation goes down to Rs 12,000 crore which is about 10 percent you go and double your holding. I think it would rather be a buy. I do not think it is a falling knife, because domestic operation in India remains strong, good. Retail brands remain strong and good.
Sonia: Why would you buy a company like Ranbaxy which has time and again given you so many USFDA issues, when there are so many other cleaner pharmaceutical companies to buy in the market?
A: I think we are all animals. We love risks and we love our returns. It is a nice thing to buy Sun Pharma, but I think it kicks all the returns one way or the other. You have got to look at where the undervalued stocks are and you have got to go for it. There will be a risk because that is why they are undervalued. The risk is inherent in them so market is not valuing them.
Sonia: How could you say Sun Pharma has not given you returns? If you look at 2013 Sun Pharma has been the biggest wealth creator. It has moved from Rs 300 and is trading at almost Rs 600. You have doubled your money in one year.
A: I absolutely agree. I am talking of January 2014. When I sit in January 2014 and I start to plan my portfolio do I expect a repeat or do I expect consolidation? I maybe totally be wrong and you may be right 100 percent. I am just saying that I would tend to believe that after the severe run ups on the stock there is a time when the stock will take a breather. There will be a time when the market will absorb it and there will be a time for it to take the next leg up in my view. 100 percent returns do not happen every year in a stock, you will agree with me. So on that basis I would tend to believe that you need to keep revolving your portfolio and I maybe totally wrong. Sun Pharma may deliver another stellar 100 percent return at the end of the day, but I would still go on the fact that when the opportunities arise in the market where companies are undervalued, there is a good play there. I am not for a moment denying that Sun Pharma is not a good stock, but if I have capital today I would go for Ranbaxy as we bought it today and did not buy Sun Pharma, because it will come back I am not saying, but there is a timing to this.
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