Mkt volatility to stay until Sept; like pvt banks: Pioneer

Sandeep Shenoy of Pioneer Investcorp believes the volatility in the market is here to stay until atleast September. In an interview to CNBC-TV18 Shenoy says the Nifty is likely to see quite a significant number of downgrades on the back of poor Q4 numbers.

While he is bullish on private banks, Shenoy says one should stay away form the state-owned banks as they are yet to come out of woods.Below are the excerpts from the interview.

I think public sector undertaking (PSU) banks still are not out of the woods. You may see one bank showing decent numbers but other two banks showing horrendous numbers. So trying to bottom-fish in PSU banks at the current juncture is playing with the probabilities. They are still not out of woods and systemic pressures are still not ebbing. So might as well stick to private sector banks despite them being ruling at valuations which make them sky-high even by global standards. It makes sense for people to stick on to private sector banks. You can give PSU banks a wide miss and you are not going to be a loser.

I think you just have to run a finger through which of the companies showing good decent growth in numbers without their EBITDA margins getting impacted or shrinking and I think you will have your list ready. You will come up with some names, which maybe falling in the same category and there could be some more names in the next few days, which could fall in the same category. In this time of choppiness, I think it is only those companies, which show growth and which have some kind of a stability on their EBITDA or profitability front. They are going to be the people but again caveat is extraordinarily costly stocks -- the stocks, which were in midcaps, you cannot have midcap stock with a P/E of Rs 35-40 and the EV/EBITDA of 25 competing with the largecap player which is equally at the same valuation level with a much higher magnitude of cash flow. That one thing will correct but otherwise you can always draw a spinner post the result season and hunt for those stocks which have shown this kind of a good growth numbers.

We are moving into a zone where the next few weeks will be dominated by the monsoon and the prediction on monsoon and which has a straight impact on the rural market and the proxy of rural market being white goods and two-wheelers. So I think this sector could be in for another round of drubbing in the market before the veracity of numbers coming, which should be at least three months down the line. So it would be better to stay away from the sector but yes, the business model of the large two players I don’t think is going to be impacted because they are cash flow generation machine even on a daily basis but if the growth gets impacted, their premium positioning could be in for a threat at the current juncture. So wait for couple of months, you are not going to be a loser, you will be able to enter them at the same levels because the rural market is not showing much signs of a pick up at the current juncture.