Investors have too much trust on RIL: PN Vijay

Arvind Kejriwal-led India Against Corruption (IAC) on Wednesday accused the Mukesh Ambani's Reliance Industries and the two biggest national parties of indulging into corrupt prices.

Portfolio manager PN Vijay told CNBC-TV18 investors have too much trust on this stock, so they are likely to ignore these allegations. "Reliance has lived through accusations. I can't remember a single year since 1980-84 when Reliance has not been accused of something, but still the stock kept going up," he added.
The accusations won't harm the stock price, but PN Vijay is skeptical about the future profit growth of RIL on the back of concerns in its oil and gas business. Below is an edited transcript of PN Vijay's interview on CNBC-TV18. Q: What do you think of the allegations from the IAC with respect to Reliance Industries? Do you see any kind of overhang on the stock today?
A: Arvind Kejriwal has been going after the high and mighty for quite some time now. It has become a routine for him to make allegations. One should say that he does research fairly well, in the Vadra case, Salman Khurshid case and before that in many other cases. He has done his homework, so one should not take his allegations lightly. But knowing little bit about this sector, gas pricing is very complex because at every level there are complexities like whom do you sell to, at what price, quantum etc. To reduce it to favors asked and favors given it is too simplistic.
As far as investors are concerned they will brush it aside because Reliance has lived through accusations. There is not a single year since1980-84 when Reliance has not been accused. Even when BP Singh was the finance minister and then the Prime Minister, he went after them as if that was his only mission, but the Reliance share kept going up.
Investors have a lot of trust in the stock. Therefore, Kejriwal accusations will not do any damage to the stock, though I have always remained skeptical about its future profit growth given what is happening in its oil and gas business. Also read: More downside in Zee Entertainment: Sukhani Q: What about Hindalco and its movement yesterday? How would you approach the stock now?
A: Hindalco's fortunes are totally dependent on the movement of the base metals, which are governed by market perception of Chinese demand. With the takeover of the new government in China and the loosening up that people have been expecting, copper has been hitting pretty high in the last few weeks.
After going into sleep for sometime during October commodities have showed some revival yesterday. Even crude has revived a bit. Given these factors, one is not too negative on Hindalco at the current prices. But given the fact that its fortunes are so dependent on global commodity prices, one would concentrate on domestic cyclicals, where, the upside is highest if one assumes a pickup in investment and both consumption activity in the country.

Q: You track Hexaware, what do you do with this stock now at the current price?
A: One was excited about Hexaware; I put had it in one of my multibaggers. About a year and a half back, when the trajectory of earnings was fantastic and the PEG rate - the price earnings to earnings growth scenario was very much in favour of investors. In this tough environment now I feel that the juice is out of the story. One can perhaps concentrate a bit more on Mahindra Satyam.
In a difficult environment, with all the negatives out of the way, Mahindra Satyam seems to be charging ahead. After a year, we will be talking about Mahindra Satyam just we used to talk about Infosys, TCS and Satyam some 2-3 years ago. So, it might climb back. If one wants to go for rerating adventurous stories, than is better than Hexaware.