Invest in beaten down cyclical stocks: Cogito Advisors

Despite Sensex touching all-time high on Friday, Sangeeta Purushottam, Cogito Advisors does not think it is a runaway bull market. She backs it up by saying for that to happen the spate of good news needs to continue, and she sees hurdles ahead.

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She advises investors to perhaps look at the beaten down cyclicals and be ready to hold them for 2-3 years. According to her, there may still be some value left in pharma and IT stocks. Though FMCG is priced to perfection and is starting to show signs of stress, she says. She feels investors can perhaps take a 5 percent exposure to infrastructure stocks in their overall portfolio across the entire gamut of these stocks. "These companies have stayed through very difficult last five years, so they have managed to live through the entire business stress," she explains.

Below is the verbatim transcript of Sangeeta Purushottam's interview on CNBC-TV18

Q: What does an investor do who missed out on this 3500 points move on the Sensex since the August lows, how do you deal with the market now?

A: If the market has to really keep going up it had to be on the back of cyclicals now. Among the defensives I think FMCG is priced to perfection and we are beginning to see signs of stress as far as demand goes. Pharma and IT are more reasonably valued, so there could be some opportunities there still for investors. The really big call is that do you shift out of defensives and into the cyclicals and I think that is to my mind really contingent on internal factors rather than external which is really the kind of government we are likely to have next year.

Now you cannot really know that till the outcome happens so in some ways it is a little bit event driven. But people could nibble a little bit at some of the cyclicals more as an option because doing it after the event is going to be very difficult. But I still don't see this market as a runaway bull market because for that to happen you need a spate of good news to continue and we still have a few hurdles ahead of us. So I would still look for companies which have decent earnings growth, stay with the very bottom up kind of approach and may be nibble in some of the really beaten down cyclicals and be ready to hold them for two-three years because you don't know whether that trade is going to work or not work.

Q: Yesterday we saw a lot of infrastructure names like IRB Infrastructure, IVRCL get back into the game. Is this a space that you would like?

A: One can take some exposure in the infrastructure names so may be a 5 percent exposure in your overall portfolio across a basket of these stocks because the argument one can make here really is that some of these companies have stayed through very difficult last five years so they have managed to live through the entire business stress.

We have seen valuations really at bombed out levels so you may not have visibility of growth immediately but you have some protection in the valuations. And given the steps that are being taken to actually ease the constraints that the sector has seen, may be a year from now we will start seeing revenues pick up. So you could take a call on that and if you are willing to hold on for two three years and you are patient I think we could get decent returns from some of these stocks.

Q: After surveying the result season is there anything that has attracted you into making it a buy?

A: My take on the result season is that it has been on the whole better than expected. However, when you actually go into the numbers it isn't as if the numbers have been great. It just tells you that our expectations have been paired down considerably and that does get built into valuations. So overall it leads to the possibility that the market could be bottoming out at these levels although the data will remain fairly mixed. So there is nothing that I am particularly changing my view on but on the whole it has been an encouraging result season.