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Last Updated : Jan 14, 2013 12:55 PM IST | Source: CNBC-TV18

Rally to resume after weakness, bet on Tech Mah: Rajen Shah

In an interview with CNBC-TV18, Rajen Shah of Angel Broking spoke about his reading of the market and his outlook.


In an interview with CNBC-TV18, Rajen Shah of Angel Broking spoke about his reading of the market and his outlook.


Below is a verbatim transcript:


Q: Give us a word on IT? What is your top pick from that space this quarter, frontline or midcap?


A: Infosys was certainly surprising, it delivered a good set of numbers. The 17 percent move was not expected at all. However, the stock has done its run up for the while. For 2014, we are expecting about Rs 180-185 kind of earnings. At the most, the stock can give you about 10 percent upside from here in the current calendar year. That would be our target for Infosys.


As far as stock pick is concerned, Tech Mahindra looks interesting even at the current level of about Rs 980. We had given a buy call at about Rs 850. We are looking at a price of at least about Rs 1,100 because it is trading at hardly about 11 times the earnings. That is the reason we see a little bit of upside on this stock.


In the midcap space - though we have booked profits in Geometric Software around Rs 114-116 levels, the stock now is back to around Rs 110. So around 11 times this Godrej Group company certainly looks interesting.


Q: What is going on with the midcap end of trade, the index is down about 2.5 percent this week, individual stocks have lost 8-10 percent each?


A: If you see the market itself is looking very tired. Friday was very surprising. Despite Infosys moving up 17 percent, the Nifty closed at same level as Thursday. The market is clearly showing that it is tired and probably could drift lower.


Our portfolio is down 5 percent over the last two weeks because most of it was into midcaps. Yes, midcaps have given up, they have corrected. I think this weakness in the market and in the midcaps may last only for a couple of weeks.


The government itself would not like the market to weaken because a lot of public sector undertaking (PSU) people are likely to come to markets in the coming months. It would not be good if the market corrects from the current level as the government will itself have problems selling its stocks.


Some good news may come in some kind of import duty on gold, that could see the gold rally soften or may come down. That could see some interest coming back into market or probably some good news –- I do not know what it could be but certainly the government would not like the market to weaken much from here. So even if we see weakness, it maybe for couple of weeks and I think the rally would again resume.


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Q: How are you guys approaching the oil and gas space now because the last week there has been quite a bit of excitement on expectations of diesel price hike, both Oil and Natural Gas Corporation (ONGC) and the oil marketing names, what would you do there?


A: There is a lot of value in all those companies, Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL) etc.


However, when I look at Mahanagar Telephone Nigam Ltd (MTNL), I feel that if the government does not act at the right time -- MTNL was quoting at Rs 300 and now it is quoting at about Rs 30 –- it is better to avoid all these PSUs because the government has not been a good creator of wealth in any of its companies.


If I want to play oil and gas, Reliance Industries Ltd (RIL) looks to be the best bet. After the deregulation of this sector, RIL would be the biggest beneficiary because it will fuel its retail expansion plans. We can expect its retail expansion plans to be very sharp in the coming years. In 2014, the higher pricing of gas could also lead to substantial jump in its profit. Also the management has already bought 4.62 crore shares at about Rs 727 plus they are getting Rs 10,000 crore of revenue from the retail business. This would be growing at more than 35 percent over the next 5-10 years. I think Reliance looks best and we have a target of Rs 1,000 for RIL by December this year.


Q: Any thoughts on some of these infrastructure stocks like GMR Infrastructure, GVK Power and Infrastructure, they are facing a lot of flat because of National Highways Authority of India (NHAI) issues recently?


A: We have been completely avoiding these companies. These companies have got a long gestation period.


One company, which we have recommended at about below Rs 500 levels and at about Rs 507 again, a couple of weeks back, was Reliance Infrastructure. It has done reasonably well. It has gone up to about Rs 560 levels and a number of its projects have started operations. So we will see the full impact of their performance in the coming year i.e. for FY14 where we are expecting the earnings per share (EPS) to grow upto at least Rs 70. The stock is at about Rs 550. So it is quoting hardly at about 8 times.


We all know that the management bought back about 44 lakh shares or so at about Rs 528 levels. So that looks interesting, we have a target of about Rs 650 for Reliance Infrastructure.


Q: What is the next big trigger in your eyes for the market? Do you think it will come from the fuel price changes, diesel hike etc which the street has been waiting for or do you think it is only on January 29 with the Reserve Bank of India (RBI) policy?

A: Yes, I think both, the fuel price changes and the January 29 RBI policy, can change the complete mood in the market, which seems to be currently weakening. So both these announcements can see the markets turning back. We are also likely to see the finance minister travelling abroad, so probably a lot of positive announcements may flow in from there. So let us see what helps the market recover.



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First Published on Jan 14, 2013 09:12 am
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