See higher funds allocation into EMs; like banks: Choksey

Anuj: We have seen quite a bit of one-way rally from the recent lows of 8500, it has been almost 400 point move now. Do you think it is time to book some profit or would you expect one more round of pre-Budget rally as we head into the February 28 Budget?

A: If you look at the global perspective and the local developments, both of them are suggesting that the environment is becoming more conducive than before which is also getting reflected into the rally which you have mentioned just now. Globally, what we are finding is that to a greater extent the situation is coming under control with the Ukraine crisis going out of the way. At the same time, Greece is likely to also be taken care of and the cross currency fluctuation and the behaviour which was affecting the global portfolio, that is also coming under decent control which is promising higher amount of allocation of funds into emerging markets like India.

At the same time, locally with the prospects becoming brighter for amount of fiscal deficit management because largely due to higher amount of auctions that they are doing into the coal mining, that is resulting into better prospects going forward. I think the fiscal deficit would remain under control and at the same time the interest rate would come down eventually because the management of proper inflation at this point of time. I would think that both these factors are helping the market to remain confident and may be Budget kind of event would be looked out for from the perspective of seeing how exactly the further growth measures are taken by the government.

So, overall remaining positive, may be some consolidation and then an upside. 9000 would be a good level to watch out for; if it crosses then we will see further upside in Nifty from current levels.

Reema: What are your thoughts on the Bank Nifty; the markets would have been at their highs at 9000 levels if it wasn’t for the Bank Nifty, what is the approach to the PSU banking space as well as the private sector banks?

A: I would think that the public sector banks (PSBs) definitely demand consideration at the highest end i.e. the top end. Large PSBs would be the beneficiary of the higher number of growth projections that we are talking about. What we saw in case of State Bank of India (SBI) result other day, is a validation of a viewpoint here wherein we believe that the higher growth rate will help those people who are having higher size book and at the same time the acceleration in the credit is likely to take place. So, better growth rate would basically benefit those who are having larger size book. So, the focus would remain within the PSB with large size bank.

At the same time, in the private sector the business model is quite decent. So, 25-30 percent kind of credit growth in a good economic environment is distinctly possibly at least with first three or four banks which we are talking about. So, I would remain positive in the banking space, may be corrections of any degree would be an opportunity to consider them accumulating into the portfolio for investment for at least two to three years and above.

Anuj: Post the deal in Suzlon, do you think it is time to take a fresh look at this one or would you give it a pass?

A: I haven’t looked into the valuation perspective of this particular deal and also I am not totally sure about how exactly the debt component of the company would be taken care of in times to come. However, one thing is for sure that when the strong promoter joint hands, at that point of time one should remain more confident about the company. So, this is an area where one can definitely look into. However as I said, I have not gone into the details so won’t be able to talk anything on specifics about this company.