Time to shop; buy largecap IT, pvt banks, pharma: Karvy

It is a good time to bring out your shopping list and make staggered purchases over the next fifteen days is the word coming in from P Phani Sekhar of Karvy Stock Broking.He thinks the market is getting into headwinds with weaker earnings yet to come, uncertainty from Fed and RBI and the prospect of an unproductive monsoon parliament session will keep the market under pressure and give an opportunity to enter at lower levels.On back of an expected general market decline, the sectors on the priority list should be large private banks, largecap IT names, FMCG and pharma but not the policy stocks.Making a case for preferring private banks over public sector banks, he says although private banks too have started reporting stressed asset quality but relatively private banks made large provisions and still reported decent profitability. He says, instead of being fixated on their Y-o-Y growth or increase in provisions, as long as they maintain return on equity around 17-19 percent range, longer-term investors need to lap them up when market presents such opportunities. Below is the transcript of P Phani Sekhar's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.

Anuj: Is the shopping list ready and what would be on top of that shopping list or would you defer your purchases for sometime?

A: We are getting into headwinds at least for the next month or so considering that the weaker part of the earning season is ahead of us. Starting today with large number of public sector undertaking (PSU) bank results then you have the uncertainty of Federal Reserve and our own Reserve Bank of India (RBI) which will report on August 4 and you also have the prospect of an unproductive monsoon session.So a combination of that is likely to take the toll on the market and to that extent, I guess it will be a good idea if you keep the shopping list ready and make staggered purchases over the next 15 days or so. The sectors that will be top on the priority list will be large private sector banks and the fact that the Bank Nifty is correcting will present a fantastic opportunity there. Largecap IT, if because of a general market decline it also declines will be a good opportunity and so will be pharmaceutical and fast moving consumer goods (FMCG) names. At this point in time, not trying to fish into policy stocks.

Ekta: Talking about the PSU banking space, we have Punjab National Bank (PNB), Bank of India (BOI) as well as Union Bank and Syndicate Bank, which are reporting numbers, tell us which one would you possibly be the most sanguine on or have the most expectations from?

A: There isn't great differentiation among any of those PSU banks and why should it be because all of them led business in consortium and all of them happened to be joint lenders to the same stressed asset quality but if one were to pick up stock there then I would lean more towards the larger public sector banks like Union Bank or PNB compared to the midcap PSU banks -- the larger PSU banks have that much more better leeway in terms of their ability to mobilise capital either through the market or through the government and the diversification in their advances basket is also much better than the midcap PSU banks. So I would lean more towards larger PSU banks but given a choice I would not go there.