More than satisfactory 1-yr; 20% mkt upside seen: Envision

Q: Specifically from a market point of view, some of those stocks are excited at this point in time is the focus on disinvestment and strategic sales. The Finance Minster saying very clearly that some hotels are likely to be candidates as far as both divestment and both strategic sales are concerned. The tourism sector in general where the government has a holding could potentially see some action. How would you rate the performance and specifically these possible divestment candidates?

A: The performance of the government has been more than satisfactory. Clearly if you look at it about 12-15 months back the big challenges before the economy was fiscal consolidation and macro economic stability. A lot of the initiatives of this government has brought about the economic stability and it is laying the foundations for growth.

The focus on divestment is very good. Clearly non-strategic areas are areas where the government should go ahead and probably even do accelerated divestment and go in for aggressive divestment. However, the missing link as far as disinvestment goes is to bring the new public sector undertakings and get them to public i.e. LIC and some of the other insurance companies should be brought public as soon as possible. I think that will be seen as a very positive and a very constructive move.

Q: On the banking sector because the Bank Nifty is up quite nicely today. The Finance Minister talking about how the banking sector has been squeezed because of the pressure on account of the NPAs and that seems to be bottoming out is his sense. What is your take on the banking stocks?

A: It looks like that we have already got a pretty bad asset quality situation and whichever way you look at it in terms of actual reported NPAs and the likelihood of a lot of restructured assets becoming NPAs in the near future, it will combine the two.

Asset quality continues to be a key challenge but it looks like that the worst is behind us and asset quality issues could bottom out in the first half of this financial year. However, the real initiatives need to be taken now in terms of capitalising these banks and re-hauling the management of some of these banks so that going forward credit growth can be brought back and risk management as well as technology related issues are addressed for public sector banks. That is the only way forward.

The most important thing is the government’s willingness to basically bring down its control holding levels from the current levels to substantially lower. I think that will be the big bang reform which the public sector banks require but of course at this stage there is no clarity whether the government intends to do this or not.

Q: What is now the outlook as far as the market is concerned? Over the last few weeks people talking about how India is not the only game in town, there is a certain level of disenchantment perhaps building up because of the kind of year that we saw in 2014 and some would say that 2014 perhaps was an abnormal year in terms of the kind of growth that the Indian markets saw. Both in terms of FII inflows, retail participation, given what we have now seen from the government, in the short-term what do you expect for the markets?

A: The year gone by has actually been a reasonably good year. Of course it is not been a breakout year, the markets have scaled new highs. However, if you look at it point-to-point probably the markets are up between 15-17 percent on the Nifty or the Sensex levels. So, in a way the kind of euphoria which the markets had witnessed during the course of the year, that is kind of settled down.

It has been a reasonably good year but clearly looks like the best times are yet to come. We believe that earnings growth will kick start from the second half of the year. It also depends on whether the government goes ahead aggressively with public investments – I think that is going to be an important catalyst for this market.

Apart from that, key legislations going through in the parliament like goods and service tax (GST) and Land Bill will add some more fillip to the market. So, clearly on the whole I think we have a very positive outlook on the markets and we believe that earnings growth will kick start sooner rather than later.

Q: What is your year end Sensex target because we have seen some brokerages revising downwards their Sensex targets as well, what is your target for the Sensex for the year end?

A: We don’t have a specific target but what it looks like that we have already kind of gone to 30,000 levels a few months back. Where we stand from here, we clearly believe that over the course of next 12 months which means 12 months from here, we would think that the next 12 months could be as good as the previous 12 months which means that the markets could potentially be up another 15-20 percent from the current levels.