Hold IT; -ve on metals; mkt subdued till earnings turn: UTI

The Indian market is expected to stay ranged till there are positive factors to drive it up, such as earnings or till the Fed rate hike is out of the way, says UTI MF Fund Manager and Head Research Lalit Nambiar.In an interview with CNBC-TV18, Nambiar discussed sector strategies, saying that while he continued to remain positive on the IT sector, the recent bounceback in metal stocks will likely not last.Below is the transcript of Lalit Nambiar’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18. Anuj: First let us start with IT sectors, we have seen both Infosys and Tata Consultancy Services (TCS) now. Both the stocks have fallen after numbers. What is your call on the sector itself? Would you incrementally be allotting more money here or would you actually take some money off from here?A: We will hold our position. We have maintained that this sector is something which you need to have in your portfolio given global volatility, given that the rupee is not totally insulated from what happens in case of a risk-off, especially given the fact that emerging markets (EM) are treated as a basket. India is very different compared to the other EMs. But having said that, when a lot of these EM funds would take money off the table, they probably are going to treat India as part of that basket, especially the exchange-traded fund (ETF). Now, in that sort of situation, you will have a problem on the currency possibly and having IT is going to help. Now, that is a macro kind of call.Apart from that, if you look at the underlying businesses, I do not think there is anything to be worried about. The first of the results which came in was a very good one and it points to a good growth. In the US, even the Gartner service talking about better growth, better discretionary spending going forward after a long period of time. So, we are quite upbeat on the IT sector.Ekta: For the metals space, we have seen a run of around 18-20 odd percent on a month-to-date basis for a couple of these metal counters, the frontline ones, the likes of Tata Steel and Hindalco and Vedanta. Any credence in terms of the gains that we have seen?A: At the margin after a lot of pain, some of these are bouncing back. It is not that the global situation on metals has changed, it is not that demand has picked up, it is not that China suddenly reversed its trend in terms of growth. So, it is broadly that and perhaps some amount of capital expenditure (capex) scale back by a lot of players given the price scenario is bringing, to some extent, the mojo back in some of these things, in terms of the fact that the price line probably will not get any worse from here.The fact that the price probably will not recover from here by much, the middle prices, is another factor to consider. So, I do not think there is really anything to read in that.You would have these short periods of time where price movement goes back to poorer quality in terms of the fundamental underlying businesses. So, the fundamental underlying business in metal I do not think there is a strong case out there. So, we will continue to be negative on that.Anuj: The market lacks triggers now. We have seen a fairly long correction. Price-wise still just about 10-12 percent but time-wise correction has now been quite long, almost eight to nine months. Do you think this kind of phase is going to continue?A: If you look at it in terms of triggers, probably you have something on the Bihar elections which is on November 8 and then if the earnings number starts looking up and there are some trends to pick up there, which the market could look at, hopefully you will not have a significant risk-off trade happening somewhere and that should ensure that the market does not fall by much.But until such time as the US Fed hike is behind us either way, either in terms of a clear statement from them that nothing is going to happen for some time, which probably may not happen, the market is going to be in a state of limbo for some more time. And once the pace of economic recovery in India starts to show through in numbers, at least in terms of volumes and top-line, that itself should probably bring some momentum back to our markets.Ekta: The primary market seems to have picked up. We have got two issuances, one which is open today, Cafe Coffee Day and we have IndiGo which is coming up as well. Any of them that you like?A: It is a question of the positioning. Without getting into specifics, in one case, you may have a pure play proposition in terms of what that company is offering in terms of market leadership and that could be something which people would look at but it all boils down to valuation.In some other cases, there are also complications in terms of the structural holding. So, all these things need to be considered before buying some of these stocks. So, it is not that there is a pure play available in one of the cases.In the other case, I presume that there will be some amount of excitement around the fact that it is a leading player in the industry and that is about it, but in the end, the bottom-line is going to be at what valuation these things are going to happen and what are you willing to pay for that.