See 9500 on Nifty by Diwali; upbeat on Strides: Nirmal Bang

Rahul Arora, CEO, Nirmal Bang Institutional Equities says the house has a positive outlook for 2015 and sees Nifty around 9500 plus/minus 5 percent by Diwali next year backed by strong fundamentals. The house expects earnings to pick up towards the backend of FY16 and there is a definite case for interest rates to come down. They also expect a stable global scenario going forward with respect to oil, Ukraine and clarity on US interest rates. Every dip in the market should be utilised as a buying opportunity, says Arora. Even today’s levels could be an entry point for the long-terms investors, he adds.Speaking about the expectations from the Budget, he says foreign institutional investors (FIIs) would be watching it far more keenly than domestic investors and in case the Budget delivers on expected lines, then there could get the big delta in direction of 9500 for the Nifty.Speaking about specific stocks, he like Strides Arcolab and sees it delivery 30-35 percent earnings CAGR over next two years between FY15 and FY17. He expects both the return on equity and return on capital for the stock to go up by 500-700 basis points in the same period.

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Below is the transcript of Rahul Arora\\'s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: What is your outlook for 2015 and what is your house call for 2015?A: Positive. I think by around Diwali next year, the Nifty could be somewhere around 9,500 plus or minus 5 percent from where we are currently.Anuj: What are you basing that on?A: Just pure fundamentals. They are expecting earnings to pick up towards the backend of FY16. there is a definite case for the interest rates to be coming down and a lot of the uncertainties that are plaguing global markets currently -- whether it is oil or otherwise, we are by and large expecting a stable phenomenon in the second half of FY16 and a lot more clarity might emerge with respect to US interest rates as well.So all things equal given the fact that iron ore, coking coal, crude prices are all in our favour. They will start showing up with a lag of one-two quarters, you might find a bit of an inventory loss in first one-two quarters, Q4 of this year and Q1 of the next but momentum should pick up in the second half of the next financial year. So by and large, every dip that you possibly get in this market, should be a good entry point where it is today as well could be looked at entering from a longer-term horizon. Ekta: Generally, most of the experts are going with the fact that the Nifty will possibly  be around 9,000 by the Budget. Considering that the winter parliament session hasn’t been as productive as it was earlier anticipated and there might now be too much pressure on the Budget session as opposed to just because of what took place in the winter session. Do you think that because of that pressure, the Nifty might not touch 9,000 simply because that is too much factored in to the budget session now?A: I would be in the minority here. When we spoke about a quarter back, I remember telling you that I don’t see the Nifty sustainably going above 8,400 till the end of this year. I was very surprised to see it go to 8,500-8,600 and it corrected for time. I don’t think the market has reacted to the winter session of parliament as much as it has reacted to what is happening on the global front as yet. The government has shown it can take the ordinance through to get things done like it has with coal and insurance and I don’t think from an economics standpoint that Budget session will probably be a washout given what we have seen right now.You are right, it is a very important event but if I was to breakdown our clientele into domestic versus FIIs, our FII clients are watching it far more closely than our domestic clients are because the feedback that we get from our domestic clients is that work will go on over a five year period but from an FII perspective, if you see, December at best has remained flat to marginally negative in the selling and that has happened over the last ten-fifteen days. From their perspective, it is a very important document because they want to see what happens with the respective fiscal deficit. Now you are seeing that the RBI’s directive also directed towards that as well, tax collections are not as strong as it is expected to be. So I don’t think the domestics are watching it with that much of interest. There is a lot of interest because it is a first full budget but I think the FII interest is far more and if it delivers then you could probably get that big delta in the direction of 9,500 that I was talking about.