Dhirendra Tiwari, Head of Research at Antique Institutional Equities, remains positive on the market despite a lackluster performance by Nifty. He sees new leg of market rally starting in January.
According to him, the draft rules for coal block auctions is a positive for the economy as it would help in increasing production, which in turn would benefit a lot of coal-based companies.
Antique continues to remain positive on Kotak Mahindra Bank post the news of it buying ING Vysya. In the midcap space, it likes PTC India and Muthoot Finance in NBFCs; Crompton Greaves, Voltas in capital goods; and Bharat Forge, Motherson Sumi and Apollo Tyres in the auto ancillary space.
Antique expect 11 percent earnings growth for Sensex in FY15 and sees it around 17 percent in FY16. It has a Sensex target of 30,000 by March 2015.
Below is the transcript of Dhirendra Tiwari's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: What is the sense you are getting on the markets now, will you remain a buyer on dips, you are not worried that it has not been able to cross 8,400?
A: I think I will remain positive. There have been certain hurdles at several points in time during last about 18 months but given the fact that if you look at last three-four quarters of earnings performance of corporate India, it has been broadly in line or slightly better than expectations and with possible recovery in gross domestic product (GDP) next year, hopes of rate cut and policy reforms etc, I would still be positive on the market. I tend to believe that this is a typical behaviour of markets towards the end of the year but I am sure come next January we will see new leg of market rally coming through.
Sonia: Yesterday we have the draft rules for the upcoming coal block auctions that was announced. How much of a game changer do you think this could be as far as coal supply is concerned and how would you approach some of these names like JSPL, Hindalco now?A: Coal auction will be a very important factor as you know the timeline has been set and important thing to notice here is the importance of coal for the growth of the economy. So important aspect is that if the production goes up, lot of companies which are basically using coal will benefit and there will be downstream beneficiaries of that. So it is very important fact and I am sure that with this coming through in the last quarter of this fiscal, we will be able to ensure coal supplies in the country.The key issues in this as to what will be the overall contour of auction, what will be the mechanism and what kind of caps we can see. We are still studying but our prima facie understanding is that it does not look too great for IPPs in the beginning probably there will be some sort of cap on the returns that they might have been enjoying in the past. So this is a very early understanding. But I believe that this is overall very positive for the sector, overall very positive for the economy as a whole because that will ensure coal availability and hence the growth in the economy.Latha: Would you buy Kotak now or what would be the ratio at which you will be comfortable if at all the purchase of ING Vysya comes through?A: The understanding will be that the M&A will be a trend to watch out for in the future and I am sure companies like Kotak who are generally seem to be pretty strong bank and probably looking for a very stronger growth in future, we will continue to be positive on Kotak Bank which we have been in the past with or without this acquisition.
Sonia: As a house, what are the top good quality midcaps that Antique has been recommending which one can still get into despite the run up?A: There are three pockets of midcaps which are looking quite promising. One is the non-banking financial companies (NBFCs) space so you have likes of PTC India Financial Services Muthoot Finance and many others.The other pocket is capital goods where you have a lot of good quality midcaps -- midcaps I would say less than USD 2 billion marketcap such as Crompton Greaves, Voltas or similar names.The third pocket will be auto ancillaries where we are seeing good traction overall. So you can find Apollo Tyres or Motherson Sumi or Bharat Forge. Bharat Forge of course is inching towards becoming a largecap so I think some of these companies in these three pockets look quite interesting from a recovery standpoint. I am sure that on the way you will find a lot of interest in smaller size public sector banks also going forward.Latha: What is your own target for the Sensex or the Nifty a year down the line and what kind of valuations will make you uncomfortable if at all?A: Our growth for FY15 Sensex earnings is about 11 percent and we are confident that probably it will be higher than that. FY16 we are looking at about 17 percent growth and close to Rs 1,850 Sensex. So from that standpoint we have valued the Sensex target at about 16 times, which comes very close to 30,000, which is March 2015 target. So I think we are thereabout -- 4-5 percent sort of gap still maintaining but I am sure that we will be revising targets when we see recovery coming in FY16 and lot more growth possibilities in FY17 as well. So as of now, close to 30,000 based on 16 times FY16 earnings.
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