Even though the market last week was volatile due to domestic and global events like the Reserve Bank of India (RBI) policy and US Fed announcements, Saurabh Mukherjea, Ambit Capital believes the Indian market is on the turn and will see greater confidence from both domestic and global investors.
For 2013, Ambit Capital has year-end Sensex target of 21,000.
According to Mukherjea money flowing into Indian funds, domestic or foreign is very clear, maybe on hopes of change in leadership at the centre and that there will be better economic management.
Similarly, Manish Sonthalia, Motilal Oswal AMC is bullish on the market going forward. He thinks Nifty could scale to 7000 by March 2014. Their funds have high weightage in Infosys and Tech Mahindra, says Sonthalia. Although for Mukherjea, amongst the big four IT players, HCL Technologies is a highest conviction buy.
Mukherjea advocates owning Bajaj Auto, because not only is the stock trading below its five-year valuations but it is likely to benefit from good monsoons, from pre-election spending and from the weak rupee.
Commenting on the auto space, Sonthalia says, "We owned Tata Motors just about 10-15 days back. But after capex increase announcement by the company, we have taken profits off the table in Tata Motors from our portfolios. I think we have preference for Maruti Suzuki, Hero Motocorp within the passenger car as well as two-wheeler space. Within the auto ancillary space we are highly overweight on Bosch, he adds"
Whereas, Mukherjea says at Ambit they remain buyers in Tata Motors and the stock continues to be in their model portfolio.
Excerpts of their interview on CNBC-TV18
Q: We had a curious week, we had a big rally on Wednesday post the Reserve Bank of India (RBI) policy, and then on Thursday we had crunching fall because of taper and Friday again we had a big move. In terms of your overall position on the market given the kind of volatile moves that we have seen, what would be your position now on the market?
Mukherjea: Without commenting on day-to-day movements which could be caused by flows of hot money which are difficult to read, I think the broader backdrop is becoming increasingly clear. There is inflows into India, there are Foreign Institutional Investors (FIIs) flows not just in India, there are flows into India specific FII funds. There are flows into the domestic mutual funds, these are strong flows now.
My reckoning is the domestic mutual funds would have seen anything like Rs 2000-3000 crore of inflows in the last next couple of months. And based on what I have heard from clients we are seeing something like USD 600-700 million flowing into India on the FII funds.
So this picture of money flowing into Indian funds, domestic or foreign is very clear. That in turn is being accompanied by confidence that there will be a change in leadership at the center in summer. There will be better economic management, the economy itself seems to have bottomed out and all of that is combining, to give India a fair bit of tailwind in terms of investor faith, in terms of faith in cyclical stories in small and midcaps and that narrative will continue through 2014.
India is an economy on the turn, a market on the turn and we will see a greater investor belief both foreign and domestic in the Indian market. 21000 remains our calendar end target for 2013, our 2014 target we are still working on.
Q: What is your prognosis on the market, do you think it is a bull market and the correction should be used to buy or would you have a slightly different view and how would you play this market going forward?
Sonthalia: I was a bit surprised with the negative movement on the market yesterday which is after the announcement of tapering by Fed but I think now that the events are all over and I maintain my positive stance on the markets and I think markets will look forward to a 7000 or thereabouts on the Nifty by March. So I maintain my bullish view on the markets.
Q: Is Infosys your top pick within the IT space or do you have other picks?
Sonthalia: Within the IT space we just have three names, we have Tata Consultancy Services (TCS), we have Infosys and we have Tech Mahindra. We are holding in some of our funds, high weightage on Infosys and Tech Mahindra and smaller portfolios. We have some what equal weightage on TCS, Infosys and Tech Mahindra.
Q: Which sectors are you bullish on?
Mukherjea: In auto, Bajaj Auto should be a core holding going into the year ahead. Yes Honda is really giving the Indian two-wheeler companies a run for their money but Bajaj is trading below its five year valuations, it will see benefits from the good monsoons, from the pre election spending that the ruling party will embark upon and it will also benefit from the weak rupee.
Q: What is your call on Tata Motors?
Mukherjea: It is relatively clear that the strength of the JLR story is broadly factored into Tata Motors share price. The big question mark now is is there a domestic recovery that will come through at some stage. Clearly the auto franchise, the passenger car franchise there is badly damaged and I am not sure if that is going to come back anytime in the foreseeable future. The question mark is on Automated Guided Vehicles (AGVs). To the extent we see a slow recovery over the five-six quarters; I think Tata Motors AGVs franchise should see some revival. We remain buyers of it; it continues to have a place on our model portfolio.
Q: What is your view in the auto space?
Sonthalia: We owned Tata Motors just about 10-15 days back so after this capex increase announcement by the company we have taken profits off the table in Tata Motors from our portfolios. I think we have preference for Maruti Suzuki, Hero Motocorp within the passenger car as well as two-wheeler space.
Within the auto ancillary space we are highly overweight on Bosch.
Q: What is your view on IT sector and HCL Technologies in particular?
Mukherjea: Our analyst has been very right on HCL Technologies, it has been a superb stock, great franchise over the last three years or so. Its remote infrastructure management franchise continues to grow from strength to strength. Axon was a visionary acquisition back in November 2008.
So amongst the big four IT players HCL Technologies is our highest conviction buy. We remain firmly committed to urging our clients to buying it. It is the only large cap IT Company which makes it to our model portfolio.
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