Still prefer bellwethers like Infy, HDFC Bk, Sun Ph: Edelweiss

Domestically, the private sector banks and urban consumption themes are likely to do well in the fourth quarter. Meanwhile, for the cement companies, the fourth quarter historically is a good quarter and so they may post good numbers. But there is no fundamental change in structural demand as such, said Maheshwari.

For the house per se, old bellwether stocks like Infosys, HDFC Bank and Sun Pharma remain a favourite and metals remain a complete 'avoid' across the board.Below is the verbatim transcript of Nischal Maheshwari's interview with Mangalam Maloo on CNBC-TV18.Q: We saw a sharp rally come in March and after that April has started with subdued note, last week we lost 2 percent, also saw a sell figure of the foreign institutional investors (FIIs) close to around Rs 1,200 crore, what do you make of that? Has the tactical money started reversing, what does this mean for the markets?A: If you look at the whole of March, the larger amount of money which was flowing in basically because there was a risk on trade in the emerging markets and the risk on trade bought a lot of money. So there was huge amount of flow basically which we saw on the exchange traded fund (ETF) side and that has caused the whole emerging markets to go up, emerging markets are also participant to that and we saw upsides here also.Obviously on top of it, we had couple of positives in India. We had a good budget basically, where the government maintained its 3.5 percent fiscal deficit, which was very positive. Finally we also had a rate cut coming in on the April 4. So these were the positives which should be basically sustaining.Q: What does this mean for the near-term in the markets because the last time we spoke to you, you said stay away from metals, stay away from midcaps and since then it is the metals, which have rallied and the midcaps have also outperformed. What does this mean?A: Giving that the risk on trade was there, we had seen some amount of bounce back so short covering was the significant as far as metals is concerned the world over. We have not seen demand coming back as far as metals is concerned the world over basically, I do not see any positive fundamentals happening on the metal side.As far as midcaps, they have fallen quite a bit. So there are opportunities, which have got created and one should look at midcaps now.Q: We are three days away from Infosys reporting Q4 results marking the start of Q4 in FY16 results, what are the sectors, which you think will shine out in this quarter and which will be the underperforming ones?A: One thing which has happened in the last quarter is basically currency rebound, currency stabilisation and the demand has come back as far as the export oriented sector is concerned. So, we are positive on all the export oriented sectors like IT, pharma, autos to an extent. Along with that some of the domestic sectors, which are going to do well is going to be private sector banks, urban consumption, these are some of the sectors which will do well in current quarter.Q: What do you make of the recent rally that we have seen in all the cement prices? In fact, start of this year we have seen all the cement prices go up or rather cement stocks go up by 30-40 percent itself. Does that mean that good set of numbers are expected in Q4, we have been speaking to companies, they see volume demand growth as well as price growth.A: If you go back into the history of cement, for last five-ten years, this is the best quarter for every cement company. Every year, you have seen that cement prices start going up in the month of January because specially after coming out of the cold season in the north, you start seeing the demand picking up in the north. Simultaneously it happens along the south and west coast also. So I think this is more seasonal. I don’t think that there is a structural demand, which has started coming into the sector.Having said that, we are seeing very strong focus of the government on the infrastructure side. So sooner or later that should become a more structural demand coming in cement but I see that a couple of quarters away.Q: Coming back to banks then, you have been quite bullish on the largecap banks State Bank of India (SBI), ICICI Bank and the likes, do you see the end of asset quality woes for the banks in this quarter or is that likely to continue?A: That is a long-term thing basically. I don’t think it is going to be over in one-two quarters. Yes, I think the larger size of the whole in the bank's balance sheet has been identified but there will be surprises, which will keep on coming in. The next big step is that the government has to decide how to recover these things. Yes, you have identified the whole, you have provided for it but now how you are going to recover all those assets, which have gone bad, that is the most important thing and market is going to keep on watching it.Q: What are your three top picks from this result season perspective?A: I think I will hold on to my old favourites. We like Infosys that is our top pick in IT. We like Sun Pharma and then our old favourite HDFC Bank. I will still hold on to the bellwether stocks of the stock market.Q: What are the three sectors or stocks which you will completely avoid before the result season?A: You can avoid metals, so Tata Steel, Hindalco, all the metal stocks you can avoid.