Mahantesh Sabarad, Deputy Head of Research, SBI Cap Securities, sees a rangebound movement in the Nifty, with the index hitting above 8500 mark. He feels there is lot of liquidity being made in the system by various central bankers, be it Bank of Japan or European Central Bank, which will keep the markets high for sometime.
“But underlying all these actions one should remember that the global economy is actually faltering,” he said.
SBI Capital Securities sees some moderation in growth expectations due to moderated Q2FY15 earnings. It sees a weakness in consumer growth and fall in exports. It however sees an increased participation from the domestic institutional investors and await Winter Session outcome for more cues.
SBI Capital is bullish on Allcargo in the logistics pack with a target price of Rs 361 and likes LIC Housing Finance (TP Rs 383) in the financials space. It is also bullish on Power Grid, HCL Tech, ONGC, Adani Ports and Tata Steel.
Below is the transcript of Mahantesh Sabarad’s interview with Latha Venkatesh & Ekta Batra on CNBC-TV18.Ekta: 8500 for the Nifty but anything different with regards to your outlook which has changed possibly for the markets post the People's Bank of China (PBC) move? A: Let me go back a month, in the same show I had said we are looking at something like 8300 at the Nifty and don’t see the Nifty going up in a hurry. We are seeing a range bound movement so 8500 has just been hit and you did question about the PBOC action, the point is there is a lot of liquidity being made available by various central bankers and we have seen them in surprise moves. Bank of Japan did it sometime back, Mario Draghi of ECB is talking of unconventional means to support the European Union (EU) and now we have the PBOC action. So, we will have eased money or liquidity available to the market which will keep the markets high for sometime. However, all these underlying actions, one should remember that the global economy is actually faltering, it is not growing. So, between the fundamental outlook versus the liquidity provision linked market going up we think the market will trade a little higher, move sideways too little higher; that is the outlook currently.
Latha: In the midcap space one of the themes that is running riot practically is the logistic space. Are they all overpriced or is there still headroom left? A: No they are not overpriced. One of the stocks that we keep recommending and would be our pick right now is Allcargo. the stock is trading just about 9 times its FY17 earnings or 10.5-10.6 times its FY16 earnings. These are not very expensive valuations when you consider that the market is already touching 20 times. Fortunately for Allcargo it is a global play on trade that means as the trade volumes grow globally we will see Allcargo actually benefit. They are not just present in India; they are a big non vessel operating common carrier (NVOCC) operator across the world. So, as the economy gradually recovers Allcargo would be a good bet. Like I said it is trading quite cheap and our target is Rs 361.
Ekta: LIC Housing Finance, that is an interesting pick from the NBFC space and its earnings also were quite stable in the quarter gone by? A: What we are looking here is a sustained growth in loan book of something like 20-21 percent in the next two to three years. In the next year that is FY16 we think its margins can expand. There is a substantial re-pricing of its existing loan book likely to happen so we will see an upward movement of margins. So, that is why sustainable business growth, upward movement in margins which would mean good returns. So, we have Rs 383 price target on the stock.
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