See no change in sector allocation, like BFSI space: Dalton

UR Bhat, director, Dalton Capital Advisors out rules a further collapse in the market going forward and believes that the market may consolidate or stagnate at current levels unless the fourth quarter number are far below expectations. According to him the institutional investors are still buying although may not be buying in large quantity. On the economic front too there are signs of improvement with the government passing some of the key bills like Insurance and mining. Diesel and petrol volumes too have shown a pick up.When asked about sector allocation, Bhat says there aren't any changes and one would still concentrate on strong balance sheet and look at banks, financial services & insurance (BFSI), autos and engineering spaces, where there is still value. Most people according to him are overweight these sectors. However, one can now start nibbling into infra on back of government spending, he addsOn the rate cut front, he does not expect another cut from RBI in April policy but thinks that the market may react in anticipation of a cut.With regards to corporate earnings, he believes September quarter to be the inflection point although some signs could be visible in the June quarter.Below is the transcript of UR Bhat’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: The markets have lost about 7 percent but there seems to be a reluctant to go down as well. Do you think this market will be save the blushes of deep cut even if the fourth quarter numbers turn out to be bad?A: If the fourth quarter numbers turn out to be very bad, all bets are off. However, nothing much is expected out of that so it should not disappoint this low expectation levels. Barring that market should sort of consolidate or even stagnate at these levels. I do not think it should go down too much because if you see the institutional interest continues in the market whether it is foreign institutional investors (FIIs) or domestic from the beginning of this year almost on a daily basis. It is just that some unwinding by local operators might be there but nothing in terms of big selling. May not be very big buying either but some buying by FIIs continues therefore the market should not collapse from here.

Even on the economy front if you see there are some small indications of change. All those bills have been passed - except the land bill, insurance bill and the mining bill has been passed so that is a very good positive some movement forward. Plus if you see even the oil, diesel, petrol volumes have improved in February. The rail freight volumes are improved these all suggest that there is some pick up in economic activity. So the markets would be satisfied. They will give more time for the government to start delivering.

Sonia: You said institutional interest is still there in individual pockets which are these pockets and where do you recommend buying now? A: In sector wise there is no dramatic change in allocation it continues to be sort of BFSI - banking financial services, it continues to be autos, engineering these is where most of the value lies and that is where most people are overweight on that is the way to go. No dramatic change on infrastructure front yet but you can probably start nibbling there because if all these bills get passed and there is some movement forward in mining activity and stuff like that things will start improving. Latha: The rate trade is over you think there is not much to buy simply because the rate cuts will come?A: For present it is over, I do not expect another cut on April 7. However it might be there further down subject to data being supportive. But the rate trade for the present is over but the market might still continue to hope for a cut on April  and that might sort of keep market interested for sometime. Latha: At what point which quarter do earnings show inflection?A: It could be, the earliest is June quarter but September quarter for sure. Things should start really doing much better. Sonia: We spoike to Credit Suisse's Neelkanth Mishra and he spoke about the roads and the port sector getting increased activity especially from the National Highways Authority of India (NHAI). Is this a sector that you would increase your weightage into? A: Certainly, these are sectors; I mean engineering sectors would cover these. These are sectors where there are eminent signs of some potential strong growth. So these are the sectors one should be in and before the whole market takes a view on that you should be there.Sonia: This is a sector where companies are highly leveraged as well, right?A: It is the nature of the business. You can not say that I will be in the power sector without being leveraged, so it is like that so you have to be leveraged in these sectors. However, as long as the going is good leverage is okay.