Investors shifting from IT, pharma into high betas: Choksey

Sectorally, IT and Pharma space is likely to see more pressure going forward too believes Choksey. However, he would look at buying Infosys on dips at levels of Rs 3,100-3,200.

From the midcap space he would consider adding stocks like LIC Housing Finance, IDFC, Adani Ports & Sez, Jain Irrigation and KPIT Technologies

Below is the transcript of Deven Choksey’s interview to CNBC-TV18’s Reema Tendulkar and Sonia Shenoy

Reema: Yesterday markets sold off quite a bit in the last hour of trade, do you think Indian markets can remain unaffected in light of the global cues and continue to rally higher?

A: In last few days we have seen the market is shedding some amount of gains and profit booking is taking place. Particularly you are seeing the pressure is coming on the IT and the pharma and I do believe that IT and pharma probably would continue to have some more pressure. So there will be sporadic downside coming in between into the stocks within this particular sector. But I do believe that these two sectors probably would face more pressure largely because there is a sector rotation which has already started happening, the appetite has already started going towards risk taking and the institutional portfolios have already started shifting part of their holding from IT and pharma into some of the high beta stocks including the cyclicals where the confidence is remaining on a larger side due to the political event which is coming up in the middle of May.

So to a greater extent the market is likely to take the political outcome as the kind of indication for further upside. I do believe that in this one and half months time probably in every dip you would see a larger amount of accumulation, long position building and good amount of activity or participation coming up from investors at large. So overall I think profit bookings are regular but at the same time there is an opportunity, Nifty trading somewhere between 6300 to 6550-6600 in this period.

Sonia: Crompton Greaves - there is some news reports suggesting that Gautam Thapar could perhaps sell his almost 43 percent stake in Crompton Greaves and that has actually fired up the stock at this point in time. What is your view on how to approach a stock that has already rallied so much and there is news of perhaps a stake sale?

A: The amount of market capitalisation as a valuation which has been talked about is double than the current market capitalization of this company which it is quoting currently. So, if this news happens to be true at some point of time then you might probably see the interest returning back into this particular counter.

From a fundamental perspective at this point of time without going into the unconfirmed news about this particular story which was reported, I would think that the company is very well placed. Their European operations which resulted into bleeding the company for last few years is now likely to probably give confusion back to the company, they have done lot of restructuring over there. I think the cost cover has already happened and profits should start coming in somewhere in 2014-15 and thereafter.

Along with that, the Indian market operations are also expected to improve given the kind of infrastructure activity getting kick-started and some of the power projects starting to rollout. So from all perspective fundamentals are looking positive. If strong promoters take over this particular stake it would be a meaningful reward for those investors who have waited with Crompton Greaves for last many years. So I am relatively more positive than otherwise on this particular company’s business.

Reema: What about Infosys after the big fall that we saw yesterday are you a buyer in Infosys?

A: I would wait for buying into it but would certainly like to consider buying. What we have seen in the commentary coming in from Infosys is that this is a clean-up operation which is going on and it is bound to result into some kind of profit pressure or margin pressure. In such situations, if the stock price corrects and if it is available at a valuation which is below 15 times price to earning ratio then in such case it would become a buy opportunity.

I would certainly wait for levels around Rs 3100-3200 where I would start considering buying back once again. I don't think fundamentally things have gone bad for the company at all. On the contrary, I believe that the move that they are likely to offload the product and the product platform business into a separate company would result into higher amount of value unlocking at some point of time. So a fall in the stock price would be welcome to add into the portfolio.

Sonia: On to your top performers that you are recommending now within the midcap space because there has been plenty of money making opportunities - if you had to name one-two stocks for us for an investor to buy now what would they be?

A: We have selected a portfolio of a few stocks within midcaps space from different sectors like LIC Housing Finance, IDFC, Adani Port & Sez, Jain Irrigation and KPIT Technologies. We would like to add these into the portfolio in corrective downside in the market.