In an interview to CNBC-TV18, Rajat Rajgarhia, head-research, Motilal Oswal Securities says he is positive on the market currently and expects it trade in a range of 5800-6200. He advises investors to start looking at equities more favourably. He expects FY15 earnings growth to be better than FY14.
Below is a verbatim transcript of the interview
Q: What is your sense? With this foreign institutional investment (FII) number turning negative will today itself be a day of unnerving cuts or do you think we might just somehow hold up because of probably election expectation?
A: The range of the market is just getting tested right now but the volatility within this range is very high. I am not negative on the markets right now. While on a weekly basis we are basing 200-300 points Nifty move, the market is likely to remain in this range of about 6,000 plus or minus 200 points. I would be surprised if we see these markets falling below the current levels.
Of course, the December 8-9 election results will be an important event to watch but markets will somewhere overcome that in couple of days and then move on to the other fundamentals.
Q: What are you recommending to investors at this point in time in terms of midcap stars because there seems to be a lot of opportunity there?
A: Yes that is true. While generally whenever we talk about macro concerns in the markets there are always excessive focus which goes on to the large caps. But if you just track the last one year itself there are a whole bunch of midcaps which have just been doing very well.
Some of the names like Persistent Systems but even if you see names like Mahindra and Mahindra Finance, Tech Mahindra which is now of course a large cap, PVR, Eicher Motors, Just Dial, Bata India. I think wherever you can identify your company which is growing its business, improving profitability, those stocks get disproportionate rerating right now because the rest of the market is not looking so exciting.
At this point of time, I think currency is one factor which is definitely making many of the midcaps look quite attractive because on the manufacturing front while it takes times for them to realize the depreciating currency gains, the business models are just getting more and more export oriented for those companies.
Q: Would you still brace for some near-term downsides probably in December when you will get the election results or as people take profit ahead of the New Year?
A: Right now I think that we are coming to a point where investors should start looking at equities more favourably while the most common way to look at the market is that we are at 6,000 Nifty but this is the sixth time in the last six years that we have seen 6,000 Nifty and every subsequent year 6,000 means that the P/E keeps on drifting down. This quarter earnings that ended led to an earnings upgrade after long time for the index earnings.
I think while markets are right now lot more volatile, at least at the macro the deterioration has stopped that in itself is positive and plus once you enter FY15 we are sure that the earnings growth will be better than FY14. I think today market trades at about 13 times FY15; these are very attractive levels for anyone to start looking to invest back into the markets.
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