The market correction is far from over and not many companies will post good numbers in the second quarter, is the word coming in from Mahantesh Sabarad, deputy head of research, SBICAP Securities. But once the results season is over, there may be better buying opportunities.
Sector-wise, he feels that the metal's space shouldn't be touched just as yet. He believes the sector will be driven by news on coal block deallocation and is likely to report below-estimate Q2 earnings.
Also Read: 'Global money worth $100bn tracks India via MSCI EM Index'
He is, however, positive on public sector banks. He says the slippage ratio is likely to fall and non-performing loans will ease ahead. The PSU banks space continues to face credit growth problems.
He is bullish on FMCG and the air-conditioning space. He advises investors to buy stocks like Voltas, Blue Star and Hitach. According to him, the fundamental story of ITC and HUL is not disturbed yet. He sees strong growth in consumption space.
Below is the verbatim transcript of Mahantesh Sabarad's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Anuj: Is the correction over, have we had another instance of just a shallow 3-4 percent correction and is this now a good time to buy and would you expect the market to go back to all time highs?
A: Not really, basically the correction is not over. We were working out Q2 numbers and not many companies are going to give very good results. So, overall Q2 result will be probably dampener on the markets. I think we will have better buying opportunities once the result season is over.
Ekta: Give us a sense in terms of how you would approach the metal space because we have seen Hindalco bounce back quite smartly on the back of Alcoa's numbers. Overall what are you expecting from the likes of Hindalco in this quarters earnings and how would you approach the metal space in general on a fundamental basis?
A: From the metal space, if you look at the stock performance for the index, it has been down in the entire quarter, roughly about 16-19 percent and that is on the back of the coal block de-allocation. So, it has been largely related to the local issues, not really the international issues so far. What do we do in terms of the result expectations ahead, what do we do in terms of the stocks ahead then, probably we are not looking at any great numbers from the metal companies, so, most of the stocks for us would be in the hold range right now.
Hindalco you mentioned, I don’t want to particularly focus on the company right now, we would rather await the result outcome. Not necessarily the Q2 results, we are essentially talking about what is going to happen to the coal block de-allocation. So, the sector has a overall overhang, demand environment is not growing, regulatory issues are cropping up and globally certain metal prices going up but overall we don’t think the sector is to be touched as yet.
Anuj: What about PSU banks, have they bottomed out, today we have seen big rally in Punjab National Bank (PNB), State Bank of India (SBI) and Bank of Baroda (BoB)?
A: You can look at the PSU banks. The story that we are chasing and we are looking at is that the slippage ratios are going to drop, the NPL pressure will ease out. We have already had the rating upgrades coming in and overall the portfolio of their lending book is appearing far better.
However, having said that if you look at the credit growth in the overall credit growth in the economy we have touched something like 9.4-9.7 and that is almost a five year low in terms of credit growth. So, it is going to be very difficult for banks, particularly PSU banks to grow their loan book.
So, the focus here is only on getting their asset quality right and seeing that the provisions are less. So, the PSU banks will do better in such an environment.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
