What makes ICICI Securities bullish on these 11 stocks

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 Below is the edited transcript of Jaideep Goswami’s interview with CNBC-TV18

Q: Let us first discuss the oil and gas space because for 2014 that is one of your themes; are you disappointed by all this flip-flop on Indian Oil Corporation (IOC) and what makes you bullish on oil and gas for 2014?

A: We are mostly bullish on the private sector companies particularly Cairn India and Reliance Industries. As as PSU space is concerned, this is a new development that cross holding will be announced, it was done in mid 1990s, it has not been a value enhancing factor in that time. I don't think there is any subsequent sell down of cross holding that still continues. That is one factor which can impact the way market perceives disinvestment process because government had a target of Rs 40000 crore.

We believe that earnings growth will be quite strong in Cairn India going forward. It is ramping up its production well, so that is one stock we really like.

For Reliance Industries, in the near term there could be headwind in terms of margin impact on refining margin as well as in petro chemicals, but valuations are quite reasonable. From a longer term perspective, we are positive on Reliance Industries as well. In the PSU space, valuation wise ONGC is looking good and GAIL will surprise positively due to the fact that they are not going to pick-up subsidy burden.

Q: The earnings season started of on a good note as we saw in Infosys and many brokerages have now come out and raised their EPS estimates for Infosys as well, how are you approaching Infosys and the IT sector?

A: Basically, commentary has been very positive; it has changed from cautious optimism to definite improvement in the environment. There was an overriding concern in the market in the light of some high level exits that have taken place. Narayan Murthy has come out and clearly explained the rationale behind the organizational restructuring.

The stock is one of our top picks right now; our analyst has upgraded the earnings growth outlook for next year. 13 percent dollar denominated growth we are expecting for FY15. Commentary has been taken very positively apart from the fact that the margin expansion led essentially by the revenue productivity has gone down quite well. Our new revised target is Rs 4065 which gives you more than 12 percent price upside from current levels. So we are bullish on Infosys.

Tata Consultancy Services (TCS) also is very good, but it has been outperforming consistently, volume growth target for TCS is even higher than Infosys, but in Infosys we are getting improvement in news which is what actually acts as a momentum for the stock. We are also quite bullish on TCS as valuations are lot richer than Infosys right now.

Q: Pharmaceutical is one of your top themes for this year but would valuations bother you here because we have seen quite a bit of run already.

A: In the first half of the year till we get a clear outcome on election results it would be difficult to put a definite bet on cyclicals. Defensive sector and pharma being export oriented sector will continue to outperform in the first few months of the year. We believe that pharma is a very good sector to be in particularly Sun Pharma, Cipla, in the midcap space we like Natco Pharma or Torrent Pharma, these are the stocks which can outperform the broader indices.

Q: You expect the index to trade in a range of 6000-6700 for the full year, why is that and what would that mean in terms of looking for opportunities in broader markets?

A: We would say that the macro risk for the market on a global basis has receded quite a lot. As far as the Indian market is concerned, election is going to be the key determinant of direction of the market and sectoral performance going forward. If you look at the situation in election run-up while there is a possibility of a weaker performance by the incumbent government, one is not clear about the new political formation that will come up particularly after the four state elections there is also new imponderables of Aam Aadmi Party.

As a result market is not clear about the kind of stable government that we will get and that can have an impact on the volatility in the index. Broadly on the external front current account deficit has been well contained and rupee volatility has subsided a lot. There are lots of positives to be taken and in general I would say the earnings situation also is likely to improve gradually. Of course the macro numbers on IIP is still weak so there are whole host of macro issues which can impact the direction of the market in a broader range between 6000 to 6700.