Overweight on banks, like pharma; avoid metals: Dipan Mehta

Dipan Mehta, member, BSE & NSE in an inteview to CNBC-TV18 shared his views on the outlook for sectors and stocks going forward.He is over weight on the banking space and advices investors to also go over weight. The other space that could benefit from lower oil prices is plastic processing; FMCG, automobiles and these according to him should be on high priority list of investors.He is also upbeat on pharma space for the long-term but in the short-term the December quarter numbers could be disappointing on back of cross currency issues.Answering a query if there is further upside for the stocks like Gati, TVS Motor that have already seen a strong run up, he says there is still more steam left in them but the performance would vary from stock to stock. They could trade higher if they keep delivering on topline and bottomline. They could also benefit from expectation of an uptick in GDP growth.He is not in favour of metals and says the current bounce in them is more of a technical nature on back of expected reforms. Historically, the mining industry, steel industry has not created wealth for shareholders. So long-term investors can avoid it but short-term traders can look at it depending on price movement, adds Mehta.

Below is the transcript of Dipan Mehta’s interview with Ekta Batra & Sonia Shenoy on CNBC-TV18.Sonia: Today all the metal stocks are up and about. In fact Sesa Sterlite, Jindal Steel and Power Limited (JSPL) all up about three to four percent. There is there expectation that the mines ordinance will be taken up at 3 pm later this afternoon. How are you approaching this sector as a whole and would you be constructive enough to put fresh money in to these stocks?A: No, not really, what we are seeing is a nice technical bounce based on some favorable outcome which is expected and in lined with reform which the government is undertaking. However, long-term prospects of the industry are always a suspect. Historically, mining industry, steel industry has not really created wealth for shareholders and no doubt traders can trade in theses stocks buying going long-going short, depending upon price volume movements and specific news flow. As a long-term investor, it is a sector which one needs to avoid. Also given that commodity cycle is on the negative side and there is so much of over capacity globally, I am not sure that the companies operating in India will be able to kind of delivery good returns on investments or create lasting value for the shareholders and other stakeholders. Sonia: What would you recommend investors do know seems like the correction is behind us and the uptrend has begun again. What are the stocks one should be looking at to buy know?A: With usual disclosures without naming stocks the sectors that we have been very positive on would be the banking sector. Clearly the 2015 would mean lower interest rate, easy liquidity, and a rally in G-Secs as well as pick up in credit offtake all of these are positive for the banking sector. Over the past two-three years when the times were really challenging, a lot of private sector banks and non banking financial companies (NBFCs) have managed their balance sheet and their operations pretty well. So, now that the times are turning favorable they will be able to make the best of the environment having emerged quite strong out of the whole process. So that is one sector we are overweight on and would advise investor to be overweight on as well. The other is the big play on the oil sector and there the industries, sectors, companies which benefit from lower oil prices that being say plastic processing or even fast-moving consumer goods (FMCG), automobiles all these sectors should be high on the priority list than the investment list for investor per se. Some amount of hedge as far as say rupee depreciation is concerned could be for the pharma sector. However, first the December quarter numbers for the pharma may be a bit disappointing given the kind of cross currency issues which are there and the problems in the Russian markets or in the Latin American markets. So, company specific disappointments may come through but long-term pharma is a great industry to be in. Broadly these three-four sectors should account for 70 percent or thereabout of the investor portfolio and then a few specific situation stocks or for that matter even IT or some of the other consumer oriented stocks could be looked at.Ekta: What would your opinion be on lot of these broader market stocks say the likes of Gati, JK Tyres, NCC limited and TVS Motor all of them which have given 250 to even 400 percent plus returns this year already. Do you think that next year you could see further incremental returns on these stocks or they would go in to consolidation mode if not profit booking? A: It depends from stock to stock and so long as this company continues to deliver the way the have in terms of their topline, bottomline. Most of the companies you have named over they have done exceedingly well not just in 2014 but last two-three years they have delivered in terms of profitability and turnover and improved their quality of their balance sheet, done much better on their equity return in assets and other such efficiency ratios. So my sense is that so long as they deliver on that front these stocks could continue to trade even higher and just because they have gone up by two or three or five times it does not mean that top has got created and that the rally in those stocks should now come to an end. Just because a stock appreciates it does not mean that it can not continue to appreciate even further.If these companies benefit from higher gross domestic products (GDP) growth rates which are expected in 2015 lower commodity prices than there are still some steam left in them.

DISCLOSURE No personal interest in stocks discussed