Banks, engineering, consumer staples safe bets: Quantum AMC

The past four months have been quite disheartening for the markets. In an exclusive interview with CNBC-TV18's Latha Venkatesh and Anuj Singh, IV Subramanium director of Quantum Asset Management Company talks about his favoured and not-so-favoured picks this season.

Below is the verbatim transcript. Also watch the accompanying video. Q: What is the overall mood now? Should one resist from buying because all the negatives like interest rates hikes, inflation worries and gargantuan fiscal deficit unwinding, are not behind us? Do the markets have to more before even investors dipping their toe in? A: From the fund point of view, we will be happy to invest. As valuations become more and more attractive, it will be wise to begin investing. The only issue would be, as the markets or stocks become cheaper, we have a wider menu to choose from. If at all one delays, it could be either to buy A or B stock, given the upside potential and the risk in each business. Otherwise, from an overall point of view and the way things have corrected, it has begun to look a lot more attractive than it was a few months ago. I would want some more correction in certain segments like the engineering space, consumer staples space or some consumer discretionary stocks. These are the areas where I would like to buy a little cheaper than what they are now. Q: Is there any space where you think the correction is over or overdone and now would be a good time to buy? You spoke about the engineering and infrastructure space where you would like to wait and see a trend even today. L&T is down about 1%. What about other spaces like banking or auto which have also corrected a bit? A: Banking after the correction definitely looks attractive. There could be some near-term pressures. But on a much normalised basis, some of them look attractive. Even in the engineering space, all the stocks do not look very expensive. Certain stocks are a lot more attractive. If the market corrects a bit more, then I would have a much wider choice to choose from. That would be the only issue where people like us would be deliberating whether to buy A, B or C stock. Even in the engineering space, certain stocks have corrected and they do look attractive. There are lot more other stocks which we would like to buy but are not buying because they are expensive. Q: Would it be the correct time to buy ADAG group stocks? A: I do not have a view on specific company or stock. We have not tracked the Reliance group very closely so I have no view on its buying. Q: Within the banking space, is there any pocket that you will start nibbling? Since you do not prefer talking stocks specific, would you suggest on a midcap public sector undertaking (PSU), private or any preferences at all? A: No. Both have corrected. After the correction, I would definitely like to buy the larger, well spread out banks in the PSU space. In the private sector, we have more names available. The ones in private sector which have exhibited the ability to control the asset quality over long period of time are the kind of banks we would buy. Q: Do you find consumer staples expensive even after them being out-performers? A: We own more than one stock in the consumer staples space. In a declining market, you will find money flowing into these kinds of safety stocks. Considering the valuations and the way the near-term margins pan out, if they become cheaper, I would add more names or weight in the same stocks. Q: The IT stocks have done well except for one day when Infosys fell post its numbers. What did you make of the earnings and what would be your advice in the IT pack? A: We are comfortable in holding on to the IT pack, particularly, the larger ones. Sometimes, the short-term investors focus a lot on the quarterly numbers. But directionally, the company is delivering what it had said and all the language there indicates that things are still positive. There are certain segments where we expect a bit more help from the market in pricing of services. But, from a volume point of view, these companies do not seem to have any problem. If, the rupee continues to favour them by depreciating, then that is an added bonus. In the entire menu of stocks available right from engineering to consumer staples, the upside in IT is lower than in any other case. In the other segments, the stock prices have corrected more sharply. Q: What is your view on real estate? Real estate index is still trading at 25% of its peak value. The stocks have been completely decimated in the latest market fall. Would you buy any of these stocks? A: The issue apart from the valuation is with the kind or quality of information we get. It is very difficult to judge and make a fair estimate of the value of these companies. Therefore, we have shied away from owning them. The correction in stock prices may make certain stocks attractive to buy. From a risk point of view, we have shied away from that market.