Large caps may show weakness; avoid fertilizers : PN Vijay

PN Vijay, Portfolio Manager, askpnvijay.com, says that he has a hold call for HDIL which is down 40 percent in last three trading days. He feels that at some stage HDIL would become an interesting buy.

Also read: Nifty consolidating may grind lower Below is the edited transcript of his interview to CNBC-TV18. Q: What is your view on the kind of blow ups we have seen in names like HDIL and IVRCL? Would you touch any of these after the kind of crash that we have seen over the last 48 hours?
A: I am unable to understand the happening in IVRCL, where an NHAI official was murdered. So, I would not comment. HDIL is down 40 percent in last three trading session. I feel the selling is overdone. On a case study basis, if the promoter sells 1 percent of his stock and put that money as unsecured loan into the company, I think that’s not earth-shaking, as long as the basic business model of the company is good and it is in a plan to reduce its debt. The company operates in Mumbai where prices are stable.    
I think HDIL at some stage would become a very interesting buy because I believe that its Mumbai focused business model and the quality of its assets even if the company goes bankrupt would attract very eager buyers. So, I would advice investors to hold HDIL and wait for fresh developments. Q: How would you approach Tata Motors now, it also crashed about 7 percent after the Jaguar Land Rover (JLR) warning, is it an opportunity to buy or do you see the stock correcting some more?
A: Tata Motors hasn't reached a buy level yet because there are certain difficult business issues that need to be addressed here. One always felt that JLR was on a bumpy ride and news flow is also not very encouraging and JLR is contributing a very large share in the Tata Motors cake. On domestic front traction is also not similar to levels of heavy commercial vehicles (HCV) sector.
These are early days of an economic recovery and anecdotally one should seen that commercial vehicle (CV) demand trails gross domestic product (GDP) growth unlike some other forward looking numbers. I don't think Tata Motors has reached that level and till a few months ago the share was around Rs 240. So, it has run up quite a lot. So, Tata Motors doesn't qualify for a blue-chip which should be bought on declines. Q: You track Coromandel. What did you make of the acquisition of Liberty Phosphate at a time when the results of its own company is poor? How would you approach the stock now?
A: Coromandel is a blue-chip stock, it belongs to a very solid group and is cash-rich. Sourcing of phosphate has always been an issue for phosphatic fertiliser companies. So, this could be like backward integration. Large companies do these type of activities. So, one should not change his views due to this factor. 
On the other hand, right now I am not too sanguine about this sector because many things could change for this sector post Budget. One should slightly avoid fertilizer sector where government involvement is high. Q: Do you think the mid-cap carnage will catch up with the large-caps or do you think it may continue to be a tale of two stories in the market?
A: No, it can't be two markets. I expect frontline stocks to weaken after a broad retail selling that we saw. So, I do expect weakness in the large-caps, very result-driven like we saw in Hindustan Unilever (HUL)for example, a small royalty announcement pulled the stock down 10 percent.
The basic logic and the nature of the market have not changed - the market is tracking global markets, slightly improved valuation of the local currency, slow improvement in the economy and interest rates. So, all these are very strong fundamentals.
As Sharma pointed out, from Monday onwards long-term investor should buy on dips because then there is credit policy which is expected to be fairly soft. So, I think Monday would provide nice buying opportunities, but I am not at all in the camp that feels that the insipient bull market is far from over. Q: Do you think Larsen & Toubro (L&T) has more upside or do you think the out performance of the last few months captures the good news on the company?
A: One should hold L&T for now because interestingly the stock didn’t move up so much in the recent rally. People sensed the difficult economic environment. What’s happening in L&T is typical of the Indian economy – like order cancellations, difficultly in execution, but falling commodity cost led to slightly decent stable margins.
On a long-term basis L&T is a core investment in all portfolios, but on a short-term it is a hold because many things have to be laid to rest like GMR and GVR orders. One should not run into L&T, but based on the earnings I would not sell the stock.