Important trigger for mkt is upcoming monsoon; like autos: Emkay

After a sharp rally in March, market is finding it hard to cross the 8000-mark. Currently, the market seems to be consolidating around 7700-7900 level, says Krishna Kumar Karwa, Managing Director of Emkay Global Financial Services. "Market is taking a breather to evaluate valuations during earnings season,” he says. Earnings, so far, have been decent, he says, adding, banking stocks, which are reeling under stressed asset situation, have shown resilence post earnings. The next bit trigger for market now is monsoon. Karwa says. Post earnings season and with more clarity on how monsoons will pan out, stocks will react positively and chances of Nifty touch 8000 level is more.With a confusing global environment and expectations of a pick-up in the rural economy, focus should now be on domestic focused companies like automobile and agri-chemicals, he says.Emkay is also bullish on the cement sector with a three year perspective. Below is the verbatim transcript of Krishna Kumar Karwa's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: We have seen our inability to conquer 7,900 a couple of times, it is a double top that is getting formed over there. What is the sense you are getting? Will it take a while for us to make that dash beyond 8,000, will that happen this result season?A: Currently, what is happening is that after the sharp rally of March, we are going through a kind of a consolidation phase in the range of around 7,700-7,900 levels and now we are going to the earning season also. So both these factors together, as far as valuations are concerned, markets are taking a breather evaluating results etc and stocks are reacting accordingly. As far as global markets are concerned, we are seeing a pause over there and that is also getting reflected.8,000 levels seems to be a level where there is a natural selling floor coming in and markets are finding it difficult. However, I am sure, it is just a consolidation phase and post the result season and maybe by June-July when we have a better clarity on how monsoons were panning out, that will be the trigger point in the next few months whereby stocks could react much more positively and then Nifty at 8,000 level should be taken out.Sonia: What have you made of the earning season so far because we have not had any major earnings accidents barring a couple of private banks here and there, how have you read into it?A: It is early days in the result season so far and typically the trend has been that the better performing companies tend to come out with their results in the first part of the season and the companies, which probably are disappointing in this quarterly earnings tend to be in the second half of this year. So what you said rightly so that the earning season so far has been deepened and even if you look at the way stocks are reacting post the results, it looks like most of the largecap results were kind of broadly discounted.So we have not seen any major price movements post the results announcements. That is what we believe. I would specifically like to look at some of the banking results. There were so much of fear etc and there post the earnings etc being announced by some of the large private banks with provisioning etc, the stock prices have been fairly stable which possibly give you a reason to believe that maybe that sector seems to be bottoming out.Obviously there are now two camps over there, one of some of those private banks which are more retail focused and which do not have too much of corporate liabilities etc, corporate exposure -- in fact the other sector of large private banks seem to be stabilising now.Latha: Until now what has shouldered the burden of the Nifty, have been largely urban focused stocks or externally focused stocks, IT, pharma, autos, private banks and maybe here and there stocks like cement as well. The true economy focused stocks like the corporate facing banks or the power stocks or the steel stocks have all not done much. Now will you start buying that, do you see an economic turnaround to buy those stocks?A: I think going forward in an economic environment where global economic environment seems to be much more confusing and if we believe that the domestic rural India uptick because of better monsoons and better government spending etc should pick up then yes, rightly you should be focusing more on the stocks or the companies which are more focused on domestic focused companies.Whether it is the auto companies -- initially you start if there is a full recovery then basically you look at the NBFCs and the banking or the financial services space where there are many banks which offer you a lot of support on valuation and hopefully, the asset quality concerns etc would also be broadly done with. If there is a recovery then that is the first place which should give you returns. After that yes, auto companies etc should be the ones which are already showing good signs of revival if you look at the numbers for the month of April, the numbers have been better than analysts' estimates. So I think that is one segment which should do very well going forward.Then agrochemical companies etc also should be participating. We are very positive on the cement sector per se. We believe that from the next three-four years perspective, a lot of capacity expansion etc have all happened and if there is a good infrastructure spending then the cement company from the next year perspective should give you very good returns across market caps.Sonia: What is the feedback that you are getting from the retail community or the domestic community now, are you noticing any kind of redemption pressures, any kind of selling over there in the interactions that you have and you spoke about how 8,000 could be a resistance on the Nifty, what is that one trigger that could perhaps help the market conquer that psychological level?A: As far as the retail investors are concerned, there are two trends, which are very distinct according to us. One is that the retail investor becoming much more prefers to invest rather through the mutual fund route or the institutional mechanism rather than trying to do direct investment. We are seeing that the flows are moving towards the mutual fund. So this is a very good trend in terms of the retail investor is realising the difficulties of investing directly versus going through experts. That is one clear-cut trend but I don’t think so and again they have become very cognisant of the fact that the returns will be slow and steady and there will be volatility in the earnings, volatility in the stock market per se so they have become very aware of that.We believe that alternate in terms of whether it is fixed income or whether it is real estate etc, there are not too many alternatives left through equity as an asset class which is becoming more and more important per se.As far as trigger, the most important triggers that markets or investors are looking at is how the monsoon pan out which probably will be first indicator possibly in the first or second week of June. That is what the biggest trigger that the market is looking at. No doubt, there has been a decent rally in many of the agri focused or the rural India focused stocks in the last one month and currently there is a consolidation which is happening but that is the biggest trigger that I believe will happen.Latha: What is your earnings forecast or earnings growth forecast for FY17 and at what point -- if you aren’t already -- you are going to buy these economy facing stocks, when would you buy State Bank of India (SBI), Bank of Baroda (BoB), Larsen and Toubro (L&T), ICICI Bank?A: As far as recommending to our investors are concerned, yes, we were very careful and cautious on the rural economy till maybe two quarters away but now in the last three months, post the Budget we have changed our stance as far as the opportunity we believe in the rural India is concerned.Primarily, because of the expected thrust by the government in terms of the rural spending etc and now that the forecast for monsoon also is better, that is should also add to the improvement in the rural economy. As far as buying on stocks focused on that segment of the economy is concerned, we will have to buy them anticipating an improvement rather than waiting for the improvement so by that time the stock prices would have moved up as we have already seen in the last one month. So we have been steadily recommending wherever there is value and wherever we believe that things pan out, there will be a good opportunity. So we have already been recommending some of the stocks which you mentioned.