Undertone for market still buoyant; buy on dips: Emkay

Sachin Shah, fund manager, Emkay Investment Managers is of the view that the undertone for the market is still very buoyant because macro factors are still in favour of Indian economy and the faith in Modi government is strong.Market is giving a decent opportunity, so utilise that to buy on dips, says Shah.Talking about sectors and stocks, he says although the slowdown in China is posing serious hurdle for the metal space but is not overly concerned about that.

Also read: Use correction to invest in equity; like IT: ICICI Pru The house is bullish on Tata Motors and owns it in their portfolio. With early signs of a turn around in the MHCV cycle space, and the company being a market leader in that is sure to benefit, says Shah in an interview to CNBC-TV18. Moreover, JLR is a strong franchise for them and the valuations too are reasonable, he adds.He is bullish on the private banks like ICICI Bank, HDFC Bank. From the NBFCs space he likes Bajaj Finance which is poised for good growth in the next few years. The house has a position in the stock.

Below is the transcript of Sachin Shah's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Anuj: There has been quite a bit of correction that we have seen but would you we brave to buy now or would you expect some more correction may be another two to three percent?A: We certainly feel that undertone in the market is still very buoyant. Lot of macro factors are still absolutely in the favor of the Indian economy and the faith in the Modi government is still very strong. There are quite a few sectors and stocks where we are still comfortable with the current valuations considering the earnings outlook that we have for the next two-three years. So, frankly we still believe that this is a decent opportunity and this is a market to buy dips. Ekta: Your outlook in terms of couple of these metal stocks for example we have Jindal Steel and Power (JSPL) which is gaining around 2.8 percent. In general what would your sense be on the metal space especially in light of the fact that the China slow down is becoming a little more prominent?A: China slow down is a serious hurdle for the entire metal space at this point in time. There could be a few days where there could be some spikes in prices. However, overall I don’t see any great excitement as far as the metal space is concerned at this point in time. There are some other issues with some of these specific companies be it debt, be some of the environmental clearances issues so all those issues are also there. However, more importantly the commodity prices we have seen there is a huge softening that is happening and it still continues. We don’t see any great reasons why one should be very excited about metal sector at this point in time.Anuj: What about Tata Motors that is also reacting negatively today?A: Tata Motors actually should do well and we also own that stock let me first make that disclaimer. We feel that there are couples of things over there one is that the Medium and Heavy Commercial Vehicles (MHCV) cycle in the domestic market seems to have bottomed out few months back and we are also seeing some earlier signs of things turning around. So in terms of the rentals that truck guys are getting we are seeing some early signs of actual turn around in MHCV and Tata Motors being the market leader should benefit. Over and above that, Jaguar Land Rover (JLR) continues to be a very strong franchise. There can be a some bit of slow down in China’s economy but JLR is very strong franchise and on the other side you have seen US markets doing very well so somewhere they will make it up and the valuations are very reasonable so Tata Motors looks like a good bet.Q: What is your view on the financials?A: Our top picks would be in the private banking and some of the niche non banking financial companies (NBFCs). So within the private banking the stocks that we own and we still like are ICICI Bank, HDFC Bank.We also like Bajaj Finance. It is one company which has done very well and will continue to do well with the kind of the growth that we have seen in the consumer durable segment. We have a very strong position there. The stock has done quite well; it is no more very cheap. However, with the kind of the growth that they deliver and the kind of the quality assets that they have my sense is that the stock would still do well in the next few years.

Disclosure: Most of the stocks we would have recommended we would own in our portfolio management services