Kunj Bansal of Centrum Wealth Management does not see a major downside for the market. According to him the trend for the market is up even though one could see a small correction in the next 10-15 days. However, the correction may not be significant enough to offer a significant entry opportunity.He is upbeat on the PSU banking space and would be a buyer in them. He thinks there is more value in PSU banks than private sector banks. Moreover, the non-performing assets (NPAs) are also likely to improve if the overall economy shows an improvement believes Bansal.He is also positive on the autos from a medium to long term timeframe. However, in the short-term the higher excise duty and poor December sales could impact them, he says.He is not so upbeat on the telecom, oil and gas and the real estate space.
Below is the transcript of Kunj Bansal's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: What is the approach now at the start of the New Year, should retail investors buy at this juncture or should they wait for some further cues on the reform momentum etc?A: That question has always been difficult to answer and pinpoint the exact timing in the market but given the way the market had moved in the second half of 2014 till November with a marginal correction in December which did not happened in midcap especially in the last two-three days of the calendar year. One can expect that there could be some correction in the next 10-15 days or so but it will not be a significant correction, so if I were to just try and put some numbers maybe 3-4 percent correction in the largecap indices, marginally higher in the individual stocks. That should be the time to look at getting into the market. I do not think that the market will give a significant downside or significantly lower entry opportunity for any investor to come in.Latha: Will you be excited enough to buy public sector undertaking (PSU)?A: Valuation wise that is one space better than private banking. We are talking of a market which has risen 30 percent in the calendar year 2014. Therefore, my view overall continues to remain positive but one also has to look at what can be the themes or stocks or sectors which can give returns from the market in the current circumstances if market continues to go up, which I feel will continue to go up – that is where the valuations will come in.
These valuations especially in case of public sector banks always tend to and should get compared with their performance, with the numbers that the banks have been declaring. Especially, the non-performing asset (NPA) scenarios but keeping the two together public sector banks today are available in the range of - depending on which banks you choose, price to book forward of 0.5 to 1 time, which is significantly attractive compared to private sector banks which are in the range of about two-four times. Second, the NPA scenario will improve if our overall call is that the economy will start improving. However, also keep in mind the fact that the long pending decision whether right or wrong, only time will tell of bifurcating the position of chairman and MD of public sector banks and finally the call has been taken by the government. The conclave which is there for two days involves the Prime Minister, finance minister, Reserve Bank of India (RBI) Governor, bank chairmen of both public and private and other dignitaries. So I am sure they have some serious thought behind it and any reforms that come out of it will certainly build up interest. Latha: So, you are a buyer in PSU bank stocks?A: Yes.Sonia: What did you make of the auto sales numbers and are there any stocks that you would continue to buy now?A: Numbers have been mixed or mixed is a softer word; marginally disappointing compared to the expectation that one would have had or had given the way the sentiment has moved positive over the last few months. We indeed saw some pick up around the festival season in December quarter especially in the months of October-November but December numbers have been mixed, in fact they have been marginally lower than expectation and also we have to keep in mind that from January 1 the higher excise duty on automobiles has become applicable. Would that have further impact on volumes in the month of January and going forward, is something to be watched but as of now the numbers are not encouraging but any correction as a result which comes in these stocks for medium to long-term, the whole sector remains positive particularly the commercial vehicle space is what we like.
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Latha: The other information we got yesterday from the coal secretary Anil Swarup is that there has been a seminal improvement in Coal India’s output against a two decade performance of three-five percent annual growth, this year it is a 10 percent annual coal output that they might deliver and this is not just a target even in October and November, the core sector numbers showed 15-16 percent growth in coal output, it maybe delivered, how do you use this information to pick stocks, is it just Coal India that you will prefer or is it any of the power stocks, how do you handle this data?A: The data is quite positive. If you look at the coal sector volumes and more particularly for the users of coal industry specifically power, so to that extent it is quite positive but let us also keep in mind that irrespective of the Coal India’s volume, some of the power sector companies had been procuring their coal requirement by imports. So that is something which will continue.However, here is a country, India, which is surplus in coal but unfortunately the production and the domestic consumption hasn’t been happening to the extent that it could happen. So to that extent, it is positive.Going forward, the pending power plants that have been stuck either for some of them for gas availability which would continue to remain an issue, some of them were in the last stage of completion because of environmental or pollution clearances and things like that, once those get cleared and they have the assured supply of the raw material especially the coal then that will certainly be positive for the power company. So not only the coal volume, I will also club it with the reforms that the new government will continue specially towards the benefit of power sector. It is where a sector such as power sector will become good investment opportunity.
Sonia: So you will restrict yourself to the power sector, you will not increase your allocation to some of the infrastructure stocks that could also benefit?A: Not like that, if we talk of broad themes, there are of course two-three things, which will pan out since we are at the beginning of the New Year maybe it is good to talk about the year as a whole but even otherwise anywhere in the range of next six-eight months to 18-20 months if we take, the two major themes that we see panning out in this timeframe is one, the cyclical recovery base theme itself.
So let us also keep in mind that if economic parameters continue to move the way they have panned out over the last few months, what I mean by that is if the interest rates continue to go and finally Reserve Bank of India (RBI) also takes a decision to start reducing interest rates, that will be a big positive for the high capital requiring industries, which again comes back to the infrastructure investment oriented companies.
Clubbed with the fact that this time, at this point of time if I may talk about the difference between the bullish market of the earlier 2005, 2006 and 2007 – the biggest fact is that at that time the commodity prices were high or were continuing to go high but this time the commodity prices have been lower. As a result, that is a big benefit for India’s macro economy. Therefore, the sectors which are dependent on the commodity prices will also benefit, which again comes back to the automobiles although these days, the commodity prices both up and down tend to get passed but still net-net the lower prices will probably result in higher demand. So to that extent, recovery base stocks as well as the government reforms base stocks. In which a large part of themes will come in, so within infrastructure, there will be power, there will be EPC companies, and one will have to still take a call on the actual project owners. So what I mean is whether the companies, which own ports or roads they will continue to see improved traffic growth.Latha: Anything you would sell? A midcap rally is stronger than the heavyweight rally, it is only 1 percent of its all time highs whereas the Nifty is a distance away. Would you want to sell anything today before the cats come back on Monday?A: No, it is always difficult to give such a short-term view of the market. So first of all today I don’t think the market is going to be negative.Latha: The good time to sell isn’t it, especially if you are stuck with some wrong stocks?A: Yes, in fact this is the discussion that we had in the last three days of the calendar year as well that there were a lot of support or movement to some of these stocks, which could be because of various reasons and vested interest. So it was a very good time. so leaving aside today, if I were to say that okay what are the themes or spaces or sectors where we would be underweight or we would not have as bullish a call comprises real estate. So that is one pack wherein we feel that one can still stay away or have a lesser weightage or maybe no weightage also. Extending that - telecom is another space which we have seen clearly underperforming, we think we will continue to underperform for sometime and another addition, which might be contrary to general people’s market expectation is oil and gas space. So we have seen some returns coming in, the oil sector largely comprises public sector companies. We have seen quite a good returns coming in this space in last year. So that is somewhere we feel possibly may not follow up with returns going forward.Latha: This week Aban Offshore is up 23 percent, IVRCL is up 19 percent, Suzlon is up 11 percent, these are all heavy debt companies at such big gains 23 percent?A: Yes, so as I said heavy debt companies are clearly the beneficiaries of the falling interest rates if that happens. We have already seen the yields in the secondary market coming around in last few months.Latha: You will remain positive on these stocks?A: Today, I don’t have compliance clearance to talk on stocks so maybe next visit I will talk about these stocks but as a theme, I said the companies which have -- not necessarily these but as a sector and as companies, which have higher capital in their balancesheet will continue to benefit and also the fact that some of these stocks could have seen the year-end support from the respective shareholders. So I would like myself and others to be cautious about that fact.
DISCLOSUREMy family & I do not have positions in the stocks discussed
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