Vibhav Kapoor of IL&FS expects more consolidation in the market. According to him, the downside range for the Nifty is 8000-8300, while the index may hit 9,000 on the upside.
In an interview to CNBC-TV18, Kapoor said that some major steps taken by the government may help revive the economy but feels the rural consumption may still take some time to improve.
He expects the US Fed to delay the hike in interest rates as employment numbers remain weak and sees more retail investors entering the domestic market through IPOs. Kapoor sees earnings improving by the second half of the quarter if the monsoon is good. He, however, expects IT companies to post moderate Q4 earnings.
Below is the transcript of Vibhav Kapoor's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: We are finding good support at 8,300. We are not quite having the spunk to beat 9,000. Is this going to be the lot for a quarter or two now?A: Our estimate was, last time we talked; the market should be consolidating and should be in a range between 8,000-8,300 on the downside and about 9,000 on the upside. The market has been in that range and from the lower levels we have seen a sharp recovery over the last seven-eight trading days. We have had continuous rise in the margin. There are two or three reasons one can ascribe to this. One, the domestic factors, I think there is some sense now that the government is doing lot of things which are going to have positive impact particularly on the infrastructure side over the next six-nine months. So you had the coal auctions completed, telecom auction completed successfully then the gas pooling which was announced few days ago, the road sector orders are beginning to go out and because of gas pooling the non-performing asset (NPAs) in the public sector undertaking (PSU) banks also will be helped. So there is a feeling that over the next six-nine months you would see things beginning on the ground. The other factor is completely global and I would like to point out that it is not only India which has been going up. If you look at the market everywhere over the last few weeks most of the markets have gone into new highs almost entire Europe, Japan, we have seen China going up and up everyday, Hang Seng went up 8 percent in two days, of course it’s the liquidity which is pushing it up but after the poor employment numbers in the US there is a feeling that interest rates are not going to rise so fast in the US and that is again pushing money back into the emerging markets.
Sonia: I want your thoughts on what’s happening in the primary market because we have had a very strong listing from the likes of Inox Wind. We have had the Rural Electrification Corporation (REC) follow on public offer (FPO) go through very well. What is your sense of how investors should approach the IPO space because we have plenty coming up now in the next three-six months?
A: The good part is that in the market whether secondary or primary, the domestic investors are beginning to come back and when that happens, the IPO market always does well. We have seen some IPOs after long time which has been successfully finished in the last few weeks and a lot more are on anvil. However, what investors should do. They should be careful in IPOs and when the market is heated, all the more reasons for them to be careful. Look at good companies, good management and good projects.
Sonia: What does one do with the pharmaceutical companies now, the ones that have given exceptional returns? Do you continue buying?A: I do not think one should continue to buy but continue to hold some of them and maybe do some profit booking. It is always good to book some profits when stocks have gone up 100-200 percent.Latha: What about IT. The results will start kicking in next week. Is it a hold, is it a stack up before the numbers. What is the view?A: I think the results are going to be moderate on the same lines as the Q3 maybe a bit worse because we have had far more cross currency headwinds and most of the companies have given out fillers that it’s a so-so quarter, so I do not think you will see any cost effective surprises. Having said that the valuations are reasonable, they are not very expensive and going into FY16 the prospects are also reasonable and at some point of time the cross currency headwind should subside particularly because the dollar may not go up that much now. It’s already gone up a lot and I would also expect the rupee to depreciate a little bit to 3 percent over the next 12 months. So IT companies are hold at this point of time and if you see some corrections happening further from here then one can start buying some of them.
Latha: You are not terribly enthused by either the financials or by IT, pharma variety. Where are the incremental gains coming from? Which sectors?
A: As we said we see the index ranging between 8,000-9,000 maybe 9,100-9,200 and we are not very far from there. Therefore, I do not see huge amount of incremental gains happening in the next three-six months and then if things continue to be good then the market can go into another up phase but for the moment you would be looking at some consolidation.
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