FIIs believe in India story; interest in HCC back: IDFC Sec

Anuj: What is the mood among foreign institutional investors (FIIs) at these record levels because this market is defying gravity now, after 10 or 12 days consolidation it is a breakout again?

A: When I look at my conference, about 180 odd companies and about 8000-9000 odd meetings and with FIIs taking up the entire day meeting people from one meeting to another they are very interested in the India story. Also, while I was interacting with a lot of them, they said that India is among the most attractive stories.

So whatever is happening, in terms of interest, it is still very much there. I think valuations are stretched but they are searching for some more opportunities within the Indian space and trying to latch on to newer ideas. So, when I look at the companies which they are looking at, they are all midcap companies which they want to attend to. So, it looks like the interest is still continuing and continuing very strongly.

Latha: What is the mood like in terms of financials? After this Kotak deal you think private sector banks are going to get some renewed look especially the smaller private sector banks?

A: That is also true because what we are seeing is that the economy is on the verge of recovery and a lot of bets are being placed on the financial sector. I think private sector has done phenomenally well even navigating itself very well during the downturn. So, that is something which one is looking at. With this deal obviously it has added an impetus to the lesser-looked private sector companies, so, that is going to happen.

However, banking space overall and I was attending a couple of meetings where they said that one of the biggest things which could happen is a sharper reduction in interest rates probably over the next six to nine months. If that happens then the whole issue surrounding capital requirements for BASEL III can come down a little bit and to that extent it can sort of help all these banks a little bit more.

So, banks are going to do well and in that sense, last time when I spoke to you the story on PSU banks that still continues to hold. We would like large PSU banks to do better in this round.

Anuj: My colleague Nimesh who is there at the conference tells me that the biggest interest in your conference has been in infrastructure and capital goods companies. If you could tell us what is the view there?

A: Interestingly what we have seen and the feedback also what I have received, I have not been able to attend all the meetings but a lot of clients have come back and given me the feedback that there is increased interest in construction companies. They are starting to receive orders and while cash flow is still an issue they have started the first end of the cycle which is receiving of orders. We had seen almost packed meetings for most of the construction companies. So, that is something which I am looking at.

Going to the capital goods companies, probably it is still some time away; they are still waiting and watching. However, it is kind of a mixed bag. So, in that sense you are first seeing the orders come through to the constructions companies and that is something which is interesting.

Latha: A standout midcap guys that you would pick out?

A: I have seen in the construction space Kalpataru Power had a lot of interest. We had seen some interest come back in Hindustan Construction Company (HCC). We also saw a lot of interest in some of the auto ancillaries; Indag Rubber and Mayur Uniquoters saw a very big interest.