Market correction a buying opportunity: Centrum Wealth

After the markets sunk on the back of rising geopolitical tension between India and Pakistan, Centrum Management feels that investors should look to use the dip in markets as an opporunity to buy.Kunj Bansal, Chief Investment Officer at Centrum Wealth Management, said that investors with a medium- to long-term horizon can look to make use of the correction to buy stocks.He expects volatility in the short term if the central bank's Monetary Policy Committee doesn't cut rates. If it does cut rates by 25 bps on Tuesday, it will be business as usual, he said. Keeping short term volatility in view, Bansal is betting on low-beta stocks such as DB Corp. He advised short-term traders to keep off NBFC stocks, while asserting that power transmission sector is a good space to play in.Below is the verbatim transcript of Kunj Bansal's interview to Latha Venkatesh & Anuj Singhal. Latha: Are you looking at the market's dip as a buying opportunity and if yes, what are you buying?

A: This question is always difficult to answer. However, I will address this as after six months of continuous month on month rise from March to August; September was the first month of correction and the largecap index Nifty corrected by 2 percent, of course that happened in the month of last two days or in fact only on the penultimate day of the month. Now that has been followed by credit policy tomorrow and let's also keep in mind that this is the first policy of new Governor as well as in the net setup of monetary policy committee (MPC).

Market is equally divided 50-50 whether the rate cut will happen or not and to that extent I see some more volatility in the short-term happening in the market if the expected rate cut doesn't come. If the rate cut comes 25 bps, it will be business as usual. Having said that yes, we are looking at this correction as a buying opportunity but more with the medium and long-term outlook. Short-term, as I said because of tomorrow's variable and going forward into the result season, it is difficult to take a call and also let's keep in mind that while in general there has been positivity on the monsoon, net-net we have ended at 3 percent deficit and relatively uneven spreads, so there have been areas of deluge and there have been areas of shortage. Within that keeping the short-term volatility in the market, I am looking at more of relatively low beta stocks starting with a print media company called DB Corp which is the publisher of Dainik Bhaskar. Currently it is trading at around Rs 400 and the forward price to earning valuation for this company is around Rs 14-14.5 and Rs 15 depends on what earnings one takes. However, to juxtapose with financials that the company operates close to 30 percent EBITDA margin, which it has been consistently operating. However, last two years as been a flattish topline growth for the company of the order of low single digit - 3-4 percent - that trend has been broken in Q1 with the topline growth of around 15-20 percent and our expectation is that in the next two years we should see that kind of 20 percent growth. The good EBITDA margin of close to 30 percent couples with very significantly high return on equity of close to 30 percent and the stock is available at price to earnings of 15 with volatility.Latha: Any other midcaps you are picking up?

A: Yes, despite the fact that I highlighted that tomorrow we could have some volatility due to credit policy, so non banking financial companies (NBFCs) for the short-term traders would be an avoidable sector but subject to what comes out in credit policy, I would still pick relatively low beta midcap old generation private sector bank that is Karur Vysya Bank. Its return on assets (RoA) has gradually started to move up from 0.9 percent level about one-and-a-half year ago to currently 1 percent and likely to move to 1.1 percent. It is available at a price to book of 1.1 times with its non-performing assets (NPAs) coming under control over the last two quarters, the trend has started to improve and so has the business growth, the net interest income growth for Q1 that is June quarter was close to 14 percent. So that is the other pick that I have.

However, moving from NBFCs and consumption oriented sector, which is where DB Corp was the stock from investment oriented sector. So while there are multiple doubts of investments happening, not happening, expenditure, capex happening or not, power transmission and distribution, more specifically not power generation per se, is one sector which is seeing continuous investments by central and state government and some of the private capex. So in that space is this company which operates called Techno Electric and Engineering Company is another buy. The company is likely to grow by about 30 percent over the next two years. It has been reporting largely similar growth for the last few quarters extending up to two years as well and operates close to 20 percent kind of EBITDA margins, available at a valuation of forward PE of 14-15. These are some of the stocks which despite short-term volatility that could be there in the market are good from the medium-term investment.